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Business  Barometers 

used  in  the 

Accumulation  of  Money 

A   Text  Book  on  Fundamental  Statistics 
for  Investors  and  Merchants 

By 

Roger  Ward  Babson 


Published  by 
The  Office  of  Roger  W.  Babson,  Inc. 

Wellesky  Hills,  Mass.,  U.  S.  A. 


^miifi,. 


This  Edition  Copyrighted  1909 

by 

Roger  W.  Babson 


DcDicatcD 
to 

PROFESSOR    G.  F.  S. 


"People  will  endeavor  to  forecast  the  future  and  make  agree- 
ments according  to  their  prophecy.      Speculation  of  this  kind  by 
competent  men  is  the  self-adjustment  of  society  to  the  probability." 
— Judge  Holmes  in  a  United  States  Supreme  Court  decision. 


193625 


"  /  hold  that  a  ma?i  who  is  long-headed^  7vho 
foresees  and  Judges  accurately^  has  an  advantage 
over  his  neighboi^  and  it  is  not  accounted  immoral 
for  him  to  use  that  advantage.,  because  he  is  individ- 
ually better  fitted  for  the  business;  and  it  i?iheres  in 
him  by  a  law  of  nature.,  that  he  has  a  right  to  the 
whole  of  himself  legitimately  applied.  If  one  man; 
or  twenty  men^  looking  at  the  state  of  the  nation 
here.,  at  the  crops,  at  the  possible  contingencies  and 
risks  of  climate,  at  the  conditions  of  Europe ;  in 
other  words,  taking  all  the  elements  that  belong  to  the 
world,  into  consideration,  are  sagacious  enough  to 
prophecy  the  best  of  action,  I  don't  see  why  it  is  not 
legitimate." 

Henry  Ward  Beecher. 


^ 


PREFACE 

This  little  book  is  prepared  for  two  purposes, 
viz: 

1.  To  show  the  possibilities  and  the  limita- 
tions of  Financial  Statistics. 

2.  To  give  simple  and  practical  examples  of 
the  use  of  such  Statistics. 

There  are  several  books  which  enter  into  the 
theory  and  technique  of  railroad  reports  and 
other  statistical  data,  but  we  know  of  no  book 
which  especially  appeals  to  the  banker,  the  in- 
vestor, and  the  merchant.  To  practical  interests 
of  this  class  of  readers,  this  short  work  is  dedi- 
cated. 

If,  at  first  reading,  the  book  should  seem  eith- 
er too  complicated,  or  extremely  simple,  we  sin- 
cerely recommend  a  second  reading,  as  it  is  not 
complicated,  neither  is  it  elementary.  It  should, 
moreover,  be  the  means  of  aiding  every  reader 
in  creating  and  retaining  wealth. 

The  writer  of  this  book  wishes  to  acknowl- 
edge the  aid  which  he  has  received  from  Miss 
Mary  B.  Smith  and  Mr.  Robert  G.  Bolles,  both 
of  whom  have  greatly  aided  in  the  compilation; 
also  to  Miss  Sawyer,  of  Wellesley,  who  aided  in 
reading  copy. 


He  also  wishes  again  to  thank  friends  in  the 
various  Stock  Exchange  Firms,  Bond  Houses, 
and  Banks  who  have  been  patient  with  him  dur- 
ing the  experimental  and  formulative  stages  of 
the  work.  These  friends  have  not  only  recog- 
nized the  difficulties  under  which  the  work  has 
been  performed,  but  have  always  greatly  aided 
by  criticisms  and  suggestions. 

R.  W.  B. 
Wellesley  Hills,  Mass.,  March  i,  1909. 


TABLE  OF  CONTENTS 


CHAPTER  I 
The  Theory  of  Statistics 
CHAPTER  II 
Range  of  Stock  Market  since  1 860  showing  the  possi- 
bilities of  Profit  to  an  Investor 
CHAPTER  III 
Range  of  Commodity  Market  since   1 860,  showing  the 
possibiKties  of  Profit  to  a  Merchant 
CHAPTER  IV 
Fundamental  Statistics  as  used  in  determining  When  to 
Buy  and  Sell 
CHAPTER  V 
Conditions  and  Events  since   1 860 
CHAPTER  VI 
The  Twenty-five  Subjects  studied  under  Fundamental 
Statistics 
CHAPTER  VII 
A  Talk  on  Coppers 
CHARTS 

1  A  Chart  showing  the  range  of  the  Stock  Market  Since 

1860 

2  A  Chart  showing  the  range  of  the  Commodity  Mar- 

ket since  1 860 


FOREWORD 

"A  study  of  past  disturbances  leads  to  the 
conviction  that  no  severe  depression  has  occurred 
which  was  not  preceded  by  loud  warnings.  These 
warnings  ought  not  to  pass  unheeded  and  in 
order  to  recognize  them  promptly/  it  is  necessary 
that  accurate  statistics  be  furnished.  Much  im- 
provement has  been  accomplished  in  the  last  few 
years,  though  it  is  to  be  regretted  that  so  much 
of  our  statistical  information  is  fragmentary  or 
inaccurate.  Official  and  private  publications  fur- 
nish much  valuable  information.  They  include 
voluminous  figures  of  deposits  and  loans  of 
banks,  movement  of  specie,  exports  and  imports, 
railway  earnings,  wholesale  prices,  and  the  con- 
dition and  probable  yield  of  crops.  A  vital  de- 
fect in  many  of  them  is  the  omission  to  give,  for 
purposes  of  comparison,  similar  figures  for  pre- 
vious months  and  years.  Another  defect  is  the 
absence  of  uniformity  in  the  methods  and  classi- 
fication employed.  These  comparative  statistics 
would  afford  a  means  of  determining  the  trend 
of  events,  and  give  warning  when  prices  are  un- 
naturally high  or  any  branch  of  business  is 
overdone.  It  is  also  note-worthy  that  we  do  not 
sufficiently    consider    statistics    relating    to    the 


course  of  affairs  in  foreign  countries,  the  influ- 
ence of  which  upon  our  own  condition  is  of  the 
utmost  importance,  by  reason  of  the  enlarge- 
ment of  our  trade  and  the  closer  international 
relations  of  modern  commerce.  Other  statistics, 
which  are  inadequate  or  lacking  and  which 
would  be  of  great  value,  are  those  pertaining  to 
the  employment  of  labor,  capital  invested  in  new 
enterprises,  amounts  expended  in  new  con- 
struction, volume  of  production  in  the  various 
kinds  of  manufactures,  and  statistics  of  state 
banks  and  savings  institutions  similar  to  those 
pertaining  to  national  banks.  After  making  due 
allowance  for  the  insufficiency  of  statistics,  it 
must  be  said  that  the  failure  to  pay  sufficient  at- 
tention to  those  already  available  is  equally  to 
be  regretted." 

The  above  was  written  in  1902  by  Hon.  The- 
odore E.  Burton,  U.  S.  Senator  from  Ohio,  and 
is  very  interesting  as  a  matter  of  prophecy.  The 
"vital  defects"  moreover  have  now  been  over- 
come and  we  are  able  to  obtain  and  furnish  reg- 
ularly the  identical  comparative  figures  which 
he  then  so  much  desired. 


OF   THE 


CHAPTER  I. 

THE     THEORY     OF     STATISTICS      AFFECTING     INVEST- 
MENT   STOCKS. 

S  it  possible,  actually  and  surely,  to 
make  money  by  the  use  of  statis- 
tics? 

Do  statistics  prove  of  absolute 
value  to  an  investor,  merchant  or 
banker,  or  are  they  a  luxury?  When  one  hears 
that  a  bond  house,  which  is  supposed  to  have  an 
elaborate  statistical  department,  has  become 
"loaded"  with  unmarketable  securities,  one  won- 
ders whether  such  statistical  departments  are  of 
any  practical  value  or  whether  they  are  main- 
tained merely  as  an  advertisement,  or  for  other 
and  sentimental  reasons.  The  same  doubt  arises 
when  one  hears  that  all  of  the  customers  of 
some  mercantile  house,  which  has  been  issuing 
elaborate  booklets  and  charts,  are  on  the  wrong 
side  of  the  market.  If  of  actual  value  in  mak- 
ing money  or  in  giving  helpful  advice  to  cus- 
tomers, the  average  business  man  is  willing  to 
pay  for  any  service  supplying  the  statistics 
necessary ;  but  if  he  cannot  make  money  more 
readily  by  their  use,  he  does  not  wish  the  statis- 
tics, either  at  his  home  desk,  or  at  the  office.  In 
other  words,   the   business   man   is   anxious    to 


12  BUSINESS  BAROMETERS 

have  any  data  directly  increasing  profits,  but 
unless  he  is  convinced  that  the  investment  will 
be  worth  while,  he  has  no  reason  for  adding  the 
cost  of  a  statistical  service  to  his  other  expenses. 
As  this  position  is  assumed  by  the  brightest 
brokers,  bond  dealers  and  investors,  we  here- 
with submit  a  short  brief  on  the  use  of  statistics 
in  business.  • 

The  Two  Classes  of  Statistics 

Statistics  are  divided  into  two  classes  viz.: 
Comparative  Statistics  and  Fundamental  Statis- 
tics ;  and  we  herewith  give  a  very  short  descrip- 
tion of  these  two  classes: 

I.    Comparative  Statistics 

From  the  investor's  point  of  view,  this  class 
includes  all  particulars  concerning  the  bonded 
debt,  the  earnings  and  the  general  physical  and 
financial  conditions  of  properties.  Such  statis- 
tics are  very  necessary  for  comparing  securities 
of  diflFerent  companies  and  the  different  securi- 
ties of  the  same  company.  So  far  as  the  mer- 
chant is  concerned,  Comparative  Statistics  re- 
late to  the  weight,  quality,  age,  and  method  of 
manufacture  of  the  merchandise  in  which  he 
deals,  together  with  such  "trade  figures"  as  are 
published  in  the  trade  journals.    If  such  data  is 


THEORY  13 

always  up-to-date,  these  Comparative  Statistics 
are  very  valuable  for  enabling  one  to  select  se- 
curities, either  for  the  purpose  of  buying  or  sell- 
ing. As  the  largest  and  most  successful  stock 
exchange  brokers,  bond  houses  and  mercantile 
firms,  are  already  well  supplied  with  Compara- 
tive Statistics  and,  so  far  as  they  are  useful, 
are  obtaining  excellent  results,  we  shall  not  here 
discuss  details  concerning  this  class.  We  wish 
it  clearly  understood,  however,  that  such  statis- 
tics are  worthless  for  determining  the  course  of 
the  entire  or  general  market.  Comparative  Sta- 
tistics determine  only  actual  values,  enabling  one 
to  select  safe  securities  or  good  merchandise,  or 
to  select  the  better  of  two  or  more  securities  or 
grades  of  merchandise.  With  the  general  mar- 
ket conditions  remaining  fixed.  Comparative 
Statistics  might  be  used  for  forecasting  a  rise 
or  a  decline ;  but  the  general  market  is  so  seldom 
stable,  that  Comparative  Statistics  cannot  be  de- 
pended upon  to  serve  this  purpose.  It  is  this 
fact,  that  they  are  inadequate  for  analyzing  gen- 
eral conditions,  that  has  brought  Comparative 
Statistics  into  ill-repute. 

The  market  value  of  securities  or  merchandise 
may  continually  decline,  and  the  actual  value  of 
the  same  increase,  or  vice  versa. 


14  BUSINESS  BAROMETERS    • 

Whoever  bases  either  purchases  or  sales, 
upon  earnings,  physical  conditions  or  other 
Comparative  Statistics  WITH  THE  IDEA  OF 
SELLING  AT  A  PROFIT,  will  surely  lose 
money.  Note  the  phrase  "with  the  idea  of  sell- 
ing at  a  profit."  Such  statistics  may  be  used  for 
selecting  a  safe  investment  or  good  merchandise, 
such  as  one  may  desire  to  hold  permanently  or 
possibly  for  a  'long  pull" ;  but  they  are  absolute- 
ly useless  for  "short  terms."  It  is  because  this 
fact  is  not  being  recognized  by  many  firms,  con- 
tent with  accumulating  only  Comparative  Sta- 
tistics, that  even  with  their  elaborate  statistical 
departments,  they  are  often  on  the  losing  side. 

II.    Fundamental  Statistics 

These  relate  to  underlying  conditions  of  the 
country  and  make  it  possible  to  forecast  demand, 
supply,  money  conditions,  etc.  Fundamental 
Statistics,  although  now  used  by  only  the  most 
careful  investors  and  merchants,  are  by  far  the 
most  necessary  and  profitable.  All  financial  his- 
tory has  consisted  of  distinct  cycles,  and  although 
of  different  durations,  each  cycle  has  consisted 
of  four  distinct  periods;  namely: 

I.     A  Period  of  Prosperity. 


THEORr  15 

2.  A  Period  of  Decline. 

3.  A  Period  of  Depression. 

4.  A  Period  of  Improvement. 

Moreover  the  laws  of  nature,  commerce  and 
industry  determine  that  these  cycles  will  always 
consist  of  four  distinct  periods.  The  idea  that 
prosperity  can  ever  become  permanent  and  will 
not  be  followed  always  by  a  business  depression, 
or  the  idea  that  there  might  be  an  unlimited  de- 
pression without  succeeding  general  activity  and 
high  market  prices,  shows  both  ignorance  of 
economics  and  utter  inexperience  in  the  business 
world. 

A  list  of  twenty-five  subjects  about  which 
statisticians  and  investors  systematically  collect, 
analyze  and  index  statistics  is  given  in  Chapter 
IV.  These  are  the  subjects  studied  by  the  oldest, 
richest  and  most  conservative  financial  and  mer- 
cantile houses  of  the  world  for  determining 
which  of  the  above  mentioned  periods  the  coun- 
try is  experiencing  or  is  about  to  enter  at  any 
given  time.  The  use  of  these  Fundamental  Sta- 
tistics eliminates  all  guessing  and  uncertainty, 
concerning  market  movements. 

The  only  requirement  is  to  collect,  tabulate, 
and  study,  the  weekly  and  monthly  figures  as 
they  are  received.    These  plainly  show  whether 


16  BUSINESS  BAROMETERS 

the  general  tendency  of  the  market  is  upward  or 
downward  and  whether  it  is  time  to  buy  or  to 
sell,  or  to  do  neither.  As  above  stated,  these 
Fundamental  Statistics  are  even  more  important 
than  Comparative  Statistics.  Not  only  are  the 
latter  of  little  value,  unless  supplemented  by 
these  Fundamental  Statistics,  but  experience  has 
shown  that  such  investors  as  have  confined  their 
operations  to  standard  securities,  and  such  mer- 
chants as  have  bought  only  staple  goods,  have 
made  fortunes  for  themselves  and  their  custom- 
ers by  a  study  of  these  Fundamental  Statistics 
exclusively. 

Conclusion 

The  amount  of  money  which  can  be  made  by 
the  study  of  such  statistics  is  limited  only  by  the 
original  capital  and  the  number  of  years  the 
study  is  continued.  Comparative  Statistics  are 
used  for  selecting  securities  and  commodities 
which  are  absolutely  safe  and  which  have  the 
greatest  prospect  of  increase  in  market  value 
under  fixed  market  conditions.  Fundamental 
Statistics  are  employed  for  determining  these 
general  miarket  conditions  and  whether  or  not  it 
is  wise  to  purchase  or  to  sell,  or  to  do  neither. 
Investors  use  this  data  in  order  to  ourchase  se- 


THEORY  17 

curities  only  when  they  are  low,  holding  them 
for  from  three  to  six  years  until  they  are  high, 
and  then  selling  and  depositing  in  a  bank  the 
proceeds  received  therefrom.  After  said  sale, 
they  leave  the  money  on  deposit  for  from  three 
to  six  years,  until  the  same  securities  again  sell 
low,  when  they  again  purchase  them  or  other  se- 
curities of  the  highest  grade. 

Many  such  investors  triple  their  money  about 
every  five  years,  with  very  little  risk,  and  with 
little  trouble.  By  a  study  of  Fundamental  Sta- 
tistics, some  individuals,  with  equally  little  risk 
and  without  any  margin-purchases,  but  by  pur- 
chasing outright,  high  grade  dividend  paying 
securities,  have  turned  an  investment  of  $5,000 
into  $250,000  in  about  twenty  years.  When 
one  realizes  the  meaning  of  this, — that  an  invest- 
ment of  $20,000  grows  to  $1,000,000  within 
twenty  years, — the  value  of  Fundamental  Statis- 
tics is  apparent.  If  one  is  not  strictly  an  inves- 
tor, but  is  willing  under  a  broker's  guidance,  to 
take  advantage  also  of  intermediate  movements, 
which  come  possibly  once  or  twice  a  year,  much 
greater  results  are  sometimes  obtained. 

Again,  many  brokers  urge  customers  to  take 
advantage  of  declines;  they  recommend  "short- 
selling"  in  periods  of  great  activity  and  pros- 


18  BUSINESS  BAROMETERS 

parity  and  also  the  purchase  of  securities  on 
margin  during  periods  of  depression.  Such  ad- 
vice is  to  be  expected  from  a  broker,  but  with 
any  short-selling  or  margin-purchases,  there  is 
connected  a  certain  element  of  risk,  and  the  in- 
vestor then  becomes  a  speculator.  If  margin 
purchases  are  undertaken,  the  margin  kept 
should  be  large, — of  from  thirty  to  forty  percent. 
Moreover,  instead  of  selling  short,  the  investors 
should  buy  "puts"  for  six  months,  or,  if  possi- 
ble, for  longer  time,  in  the  London  market. 
These  "puts"  allow  the  holder  to  make  almost  as 
much  profit  as  if  he  had  sold  the  stock  short. 
Any  loss  he  may  sustain  is  limited  to  the  price 
paid  for  the  "put,"  or  about  $125  for  one  hun- 
dred shares  of  stock. 

There  is  no  logical  objection  to  buying  on 
large  margins ;  but  the  point  which  the  book  em- 
phasizes is  namely:  An  investment  of  a  few 
thousand  dollars  can  he  multiplied  to  an  invest- 
ment of  several  hundred  thousand  dollars  in 
about  tzventy  years  with  hut  very  little  risk  and 
without  selling  "short,"  or  purchasing  on  mar- 
gin. The  only  requisite  is  a  constant  study  of 
Comparative  and  Fundamental  Statistics,  and 
sufficient  self  control  to  act  only  in  accordance 
with  what  these  statistics  clearly  indicate,  refus- 


THEORY  19 

ing  to  listen  to  the  optimism  or  pessimism  sup- 
plied by  the  daily  papers  and  by  the  many  indi- 
viduals who  are  always  giving  free  advice. 

The  above  principles  apply  to  bonds  as  truly 
as  to  stocks,  and  should  be  studied  by  the  inves- 
tors who  purchase  only  bonds  as  well  as  those 
who  purchase  stocks.  Although  bonds  do  not 
fluctuate  as  widely  as  stocks,  and  for  this  reason 
do  not  present,  apparently,  as  great  an  oppor- 
tunity for  profit,  yet  their  minimum  interest 
yield  is  absolutely  fixed,  which  is  not  true  even 
with  the  most  conservative  stocks.  Bonds  are 
especially  recommended  to  persons  dependent 
upon  the  income  received  from  their  investments ; 
and  the  writer  is  inclined  to  advise  that  all  per- 
sons should  have  a  portion  of  their  principal 
either  on  deposit  in  a  bank,  or  else  in  high  grade 
bonds,  or  short  time  notes. 

Among  other  reasons,  this  advice  is  based  on 
the  fact  that,  if  it  becomes  necessary  to  sell  se- 
curities in  order  to  obtain  cash  during  a  period 
of  depression,  a  person  may  sell  short  term 
bonds  or  notes,  with  much  less  loss  than  long 
term  bonds  or  stocks.  However,  persons  who 
follow  the  theory  emphasized  in  this  book  should 
have  their  principal  at  such  times  wholly,  in 
cash  or  short  time  notes,  instead  of  in  either 


20  BUSINESS  BAROMETERS 

stocks  or  long  term  bonds;  a  practice  which 
should  eliminate  the  objection. 

Merchants  who  never  buy  or  sell  securities, 
use  this  data  with  equal  profit.  Fundamental 
Statistics  clearly  show  the  merchant  when  to 
buy  and  increase  his  stock  of  goods,  and  when  to 
cut  prices  and  reduce  his  stock.  They  also  enable 
the  merchant  to  forecast  money  conditions  in  or- 
der that  he  may  intelligently  decide  whether  to 
borrow  the  money  necessary  to  allow  customers 
further  credit,  or  to  reduce  his  loans  and  the 
indebtedness  of  his  customers.  Moreover,  at  all 
times,  these  figures  show  the  merchant  the  con- 
dition of  business  throughout  the  country,  so 
that  he  always  knows  whether  the  growth  or 
contraction  of  his  business  is  proportional  to 
that  of  his  competitors. 

Upon  careful  thought  it  must  be  admitted  that 
the  fortunes  of  America's  merchant  princes  must 
have  been  created  by  a  knowledge  of  these  facts, 
rather  than  by  simple  selling  to  the  trade  at  a 
normal  profit.  Therefore,  not  only  does  the 
proper  use  of  Fundamental  Statistics  insure  a 
merchant  against  losses,  but  their  use  should  be 
almost  as  profitable  to  him  as  to  the  investor, 
enabling  him  to  double  and  triple  his  capital 
every  few  years. 


THEORY  21 

Such  ideas  of  the  value  of  statistics  should 
therefore  be  especially  interesting  to  the  small 
merchant  with  capital  of,  for  instance,  only 
$10,000.  For  there  is  no  reason  why — with 
Fundamental  Statistics  as  aid  to  the  elimination 
of  bad  accounts  and  unsold  goods — he  should 
not  have  a  capital  of  $250,000  within  about 
twenty  years. 


CHAPTER  II 

RANGE  OF  THE  LEADING  INVESTMENT  STOCKS  SINCE 
i860,  SHOWING  HOW  $2,500  INVESTED  IN  1860 
WOULD   AMOUNT    TO    OVER    $I,8oO,000    IN    I9O9. 

The  accompanying  chart  is  designed  to  show 
the  fluctuations  in  the  leading  investment  stocks 
from  i860  to  date  as  accurately  as  may  be. 
Only  the  best  stocks  of  the  period  are  consid- 
ered, so  the  stocks  described  are  as  representa- 
tive as  possible  of  the  different  classes  of  traffic 
and  of  the  different  sections  of  the  country. 

^'Central  of  New  Jersey"  is  a  minority  stock, 
"St.  Paul"  is  a  speculative  stock,  and  "Dela- 
ware &  Hudson"  is  a  coal  stock.  The  West  is 
represented  by  "Great  Northern,"  the  Missis- 
sippi Valley  by  "Illinois  Central,"  the  South  by 
"Louisville  &  Nashville";  the  central  and  mid- 
dle States  by  "New  York  Central"  and  "Penn- 
sylvania." The  New  England  States  are  repre- 
sented by  "New  York,  New  Haven  &  Hartford," 
and  "Pullman"  is  chosen  for  the  most  conserva- 
tive industrial. 

Of  these  ten,  only  three  were  in  existence  and 
prominent  in  i860.  New  York  Central,  Illinois 
Central  and  Delaware,  Lackawanna  &  Western 


RAJJGE  OF  STOCK  MARKET  23 

were  active  then  and  leaders  still. 

In  1866  "Delaware  &  Hudson"  and 
in  1872  ''Louisville  &  Nashville"  became 
active,  and  in  1874  "Central  of  New  Jersey." 
In  1876  "Pullman"  became  active  and  in  1889 
"Pennsylvania."  These  are  the  ten  stocks  used 
exclusively  until  1900  when  "Delaware,  Lacka- 
wanna &  Western"  was,  for  various  reasons, 
omitted.  As  "Great  Northern"  sold  for  the 
same  price,  namely  91,  at  about  that  time, 
this  is  substituted  in  its  stead. 

In  other  words,  only  good  stocks  have  been 
included  in  the  list,  stocks  truly  represen- 
tative during  the  period  considered.  Stocks 
which  have  shown  any  abnormal  rise  or  decline 
have  purposely  been  avoided.  For  this  reason, 
stocks  such  as  "Union  Pacific,"  "Atchison"  and 
"Reading"  have  been  omitted.  More  industrials 
would  have  been  included,  if  they  had  been  in 
existence  a  longer  period ;  but,  as  most  of  the 
companies  have  been  organized  only  ten  or  fif- 
teen years,  this  was  not  possible.  Therefore, 
the  diagram  may  be  depended  upon,  absolutely, 
as  showing  the  fluctuations  which  a  conserva- 
tive investor  may  expect. 

It  has  also  been  very  interesting  to  figure  the 
income  received  upon  the  investment,  which  va- 
ried   from  5%    to  10%.      If  all    "rights"    were 


24  BUSINESS  BAROMETERS 

considered,  the  profit  would  often  be  more  than 
10%  but  in  this  also  any  possible  exaggeration 
has  been  avoided.  For  greater  exactness  since 
"Great  Northern"  gave  its  ore  certificates,  the 
price  of  these  certificates  has  been  included  with 
the  price  of  the  stock.  The  complete  list,  as  it 
stood  at  the  low  point  in  1907  and  on  January 
1st  1909,  is  as  follows: 


Div. 

Low  1907 

Div. 

Jan. 1909 

Central  New  Jersey 

$8 

144 

$s 

228 

Chicago,  Mil.  &  St.  Paul 

7 

93 

7 

151 

Delaware  &  Hudson 

9 

124 

9 

181 

Gt.  Northern  plus  1  Ore. 

Cert. 

.7 

144 

7 

221 

Illinois  Central 

7 

116 

7 

149 

Louisville  &  Nashville 

6 

86 

5 

126 

New  York  Central 

6 

89 

5 

126 

N.Y.,N.H.&  Hartford 

0 

127 

8 

161 

Pennsylvania 

7 

103 

6 

132 

Pullman 

8 

135 

8 

171 

The  list  includes  "Central  of  New  Jersey," 
and  "Chicago,  Milwaukee  &  St.  Paul,"  in  order 
to  tabulate  a  minority  stock  and  a  speculative 
stock.  As  an  investment,  however,  others 
may  be  preferable.  When  substituting  them, 
some  brokers  recommend  that  one  select  stocks 
selling  for  about  the  same  prices  as  those  omit- 
ted. It  should  always  be  remembered  that  an  in- 
vestor, when  buying  or  selling,  should  not  study 
the  present  prices  of  the  stocks  which  he  intends 
to  purchase,  but  rather  the  prices  of  the  ten 


RANGE  OF  STOCK  MARKET  25 

representative  stocks  in  the  list  given  above. 
This  is  because  he  should  buy  or  sell  in  accord- 
cmce  with  general  conditions,  and  not  be  gov- 
erned by  the  price  of  any  stocks  which  he 
happens  to  hold.  A  diagram  of  any  other  ten 
stocks  may  be  misleading  and  cause  trouble. 

The  -low  and  high  prices  of  the  above  ten 
stocks  from  i860  to  date  are  given  in  the  ac- 
companying tables: 

i860  AVERAGE  59-93 

Lackawanna  ranged  from  54  (Jan.)  to  99 
(June);  111.  Cent.  55  (Jan.)  to  89  (Aug.); 
N.  Y.  Cent.  92  (Sept.)  to  69  (Dec). 

1861  AVERAGE  62-84 
Lackawanna   ranged  from  84   (Mch.)    to  65 

(Dec.)  ;  111.  Cent.  88  (Jan.)  to  55  (April)  ; 
N.  Y.  Cent.  82  (Jan.)  to  68  (April). 

1862  AVERAGE  71-107 
Lackawanna  ranged  from  80  (April)   to  130 

(Dec. ) ;  111  Cent.  55  (July)  to  84  (Oct.) ;  N.  Y. 
Cent.  79  (Jan.)  to  107  (Oct.) 

1863  AVERAGE  106-153 
Lackawanna  ranged  from  130  (Jan.)   to  198 

(Dec.) ;  111.  Cent.  83  (Jan.)  to  126  (Aug.)  ; 
N.  Y.  Cent.  107  (Mch.)  to  140  (Sept.). 

1864  AVERAGE  138-148 
Lackawanna  ranged  from  195   (Jan.)   to  265 

(Sept.);  111.  Cent,  no  (Mch.)   to  135  (Oct.); 


26  BUSINESS  BAROMETERS 

N.  Y.  Cent.  145  (Mch.)  to  109  (Oct.). 

1865  AVERAGE  125-158 
Lackawanna  ranged  from  225   (Jan.)  to  199 
(Mch.);  111.  Cent.  92    (Mch.)    to   130  (July); 
N.  Y.  Cent.  119  (Jan.)  to  85  (April). 

1866  AVERAGE  99-128 

St.  Paul  ranged  from  41  (Mch.)  to  64 
(Nov.);  Del.  &  Hud.  132  (Mch.)  to  160 
(Nov.)  ;  Lackawanna  162  (Jan.)  to  127  (Feb.) ; 
111.  Cent.  131  (Jan.)  to  112  (Feb.);  N.  Y. 
Cent.  86  (Feb.)  to  123  (Nov.). 

1867  AVERAGE  98-122 

Cent,  of  N.  J.  ranged  from  125  (Jan.)  to 
113  (Dec);  St.  Paul  25  (April)  to  54  (July); 
Del.  &  Hud.  139  (Jan.)  to  156  (Jan.)  ;  Lack- 
aVanna  130  (July)  to  109  (Oct)  ;  111.  Cent,  in 
(Jan.)  to  135  (Dec.)  ;  N.  Y.  Cent.  94  (Feb.) 
to  118  (Dec);  New  Haven  114  (Jan.)  to  140 
(Dec). 

1868  AVERAGE  108-147 

Cent,  of  N.  J.  ranged  from  126  (June)  to 
no  (Dec);  St.  Paul  46  (Feb.)  to  ni  (Oct.); 
Del.  &  Hud.  165  (May)  to  n9  (Aug.);  Lack- 
awanna no  (Jan.)  to  132  (Oct.);  111.  Cent. 
130  (Jan.)  to  159  (July);  N.  Y.  Cent,  no 
(April)  to  159  (Dec.)  ;  New  Haven  133  (Jan.) 
to  159  (May). 


RANGE  OF  STOCK  MARKET  27 

1869  AVERAGE  1 14-160 

St.  Paul  ranged  from  84  (Aug.)  to  61 
(Sept.) ;  Del.  &  Hud.  134  (June)  to  120  (Dec.) ; 
Lackawanna  120  (Jan.)  to  104  (Nov.) ;  111. 
Cent.  148  (May)  to  130  (Dec);  N.  Y.  Cent. 
217  (July)  to  153  (Sept.);  New  Haven  160 
(Jan.)  to  120  (April). 

1870  AVERAGE  102-120 

St  Paul  ranged  from  75  (Jan.)  to  52  (Dec.) ; 
Del.  &  Hud.  115  (Mar.)  to  127  (July);  Lack- 
awanna 112  (May)  to  100  (Sept.);  111.  Cent. 
145  (Feb.)  to  129  (July);  N'.  Y.  Cent.  86 
(Jan.)  to  102  (June)  ;  New  Haven  134  (Jan.) 
to  159  (June). 

1871  AVERAGE  103-117 

St.  Paul  ranged  from  48  (Jan.)  to  64  (Sept.); 
Del.  &  Hud.  115  (Feb.)  to  125  (Dec);  Lack- 
awanna 102  (Feb.)  to  III  (Sept.);  111.  Cent. 
139  (Jan.)  to  132  (Oct.) ;  N.  Y.  Cent.  103 
(April)  to  84  (Oct.)  ;  New  Haven  140  (April) 
to   160   (June). 

1872  AVERAGE  97-110 

St.  Paul  ranged  from  64  (April)  to  51 
(Nov.) ;  Del.  &  Hud.  124  (Jan.)  to  115  (Oct.)  ; 
Lackawanna  112  (Mar.)  to  91  (Dec);  111. 
Cent.  140  (June)  to  119  (Nov.);  Louis.  & 
Nash.  81  (Oct.)  to  79  (Dec) ;  N.  Y.  Cent.  loi 


28  BUSINESS  BAROMETERS 

(April)  to  89  (Nov.) ;  New  Haven  148  (June) 
to  138  (Dec). 

1873  AVERAGE  75-106 

St.  Paul  ranged  from  62  (April)  to  21 
(Nov.)  ;  Del.  &  Hud.  124  (Feb.)  to  99  (Nov.) ; 
Lackawanna  106  (June)  to  79  (Nov.) ;  111. 
Cent.  126  (Jan.)  to  90  (Nov.) ;  Louis.  &  Nash. 
79  (Mch.)  to  50  (Dec.) ;  N.  Y.  Cent.  106 
(Feb.)  to  "jj  (Nov.)  ;  New  Haven  142  (Feb.) 
to  112  (Nov.). 

1874  AVERAGE  87-99 

Cent,  of  N.  J.  ranged  from  98  (Jan.)  to  109 
(Feb.)  ;  St.  Paul  41  (Jan.)  to  31  (May)  ;  Del. 
&  Hud.  121  (Jan.)  to  113  (Aug.);  Lacka- 
wanna 99  (Jan.)  to  112  (Feb.);  111.  Cent.  108 
(Feb.)  to  90  (Oct.)  ;  Louis.  &  Nash.  53  (Jan.) 
to  59  (Feb.)  ;  N.  Y.  Cent.  105  (Mch.)  to  95 
(May)  :  New  Haven  122  (Jan.)  to  139  (Nov.). 

1875  AVERAGE  87-100 

Cent,  of  N.  J.  ranged  from  120  (April)  to 
99  (Oct.) ;  St.  Paul  40  (April)  to  28  (June)  ; 
Del.  &  Hud.  no  (Feb.)  to  124  (Dec.)  ;  Lack- 
awanna 106  (Jan.)  to  123  (April)  ;  111.  Cent. 
106  (April)  to  88  (Oct.)  ;  Louis.  &  Nash.  40 
(Feb.)  to  36  (April)  ;  N.  Y.  Cent.  100  (May) 
to  107  (May)  ;  New  Haven  133  (Jan.)  to  147 
(Dec). 


I 


RANGE  OF  STOCK  MARKET  29 

1876  AVERAGE  62-100 

Cent,  of  N.  J.  ranged  from  109  (Feb.)  to  21 
(Sept.);  St.  Paul  46  (Feb.);  to  18  (Nov.); 
Del.  &  Hud.  125  (Jan.)  to  61  (Oct.) ;  Lacka- 
wanna 120  (Jan.)  to  64  (Oct.) ;  111  Cent.  103 
(Mch.)  to  60  (Dec.) ;  Louis.  &  Nash.  32 
(April)  to  24  (Dec.)  ;  N.  Y.  Cent.  117  (Feb.) 
to  96  (Sept.)  ;  New  Haven  146  (Jan.)  to  159 
(Mch.)  ;  Pullman  70  (Jan.)  to  85  (April). 

1877  AVERAGE  48-76 

Cent,  of  N.  J.  ranged  from  37  (Jan.)  to  6 
(June) ;  St.  Paul  11  (April)  to  42  (Oct.) ;  Del. 
&  Hud.  74  (Jan.)  to  25  (June)  ;  Lackawanna 
yy  (Jan.)  to  30  (June) ;  111.  Cent.  40  (April)  to 
79  (Oct.)  ;  Louis.  &  Nash.  26  (Mch.)  to  40 
(Dec.) ;  N.  Y.  Cent.  85  (April)  to  109  (Oct.)  ; 
New  Haven.  146  (April)  to  158  (Dec);  Pull- 
man 75  (Feb.)  to  71  (Mch.). 

1878  AVERAGE  61-76 

Cent,  of  N.  J.  ranged  from  13  (Jan.)  to  45 
(July)  ;  St.  Paul  54  (June)  to  27  (Sept.) ;  Del. 
&  Hud.  59  (July)  to  34  (Dec.)  ;  Lackawanna 
61  (July)  to  41  (Dec);  111.  Cent.  72  (Feb.) 
to  85  (June)  ;  Louis.  &  Nash.  35  (Oct.)  to  39 
(Dec)  ;  N.  Y.  Cent.  103  (Mch.)  to  115  (Sept.)  ; 
New  Haven  153  (Jan.)  to  162  (Nov.) ;  Pull- 
man y2  (Feb.)  to  80  (July). 


30  BUSINESS  BAROMETERS 

1879  AVERAGE  66-106 

Cent,  of  N.  J.  ranged"  from  33  (Jan.)  to  -89 
(Nov.) ;  St.  Paul  34  (Jan.)  to  82  (Nov.) ;  Del. 
&  Hud.  38  (Feb.)  to  89  (Nov.);  Lackawanna 
43  (Jan.)  to  94  (Nov.)  ;  111.  Cent.  79  (Mch.) 
to  100  (Dec.)  ;  Louis.  &  Nash.  35  (Feb.)  to 
89  (Dec);  N.  Y.  Cent.  112  (Mch.)  to  133 
(Oct.)  ;  New  Haven  171  (June)  to  154  (Nov.)  ; 
Pullman  73  (Jan.)  to  109  (Nov.). 

1880  AVERAGE  87-131 

Cent,  of  N.  J.  ranged  from  85  (April)  to  45 
(May)  ;  St.  Paul  66  (May)  to  114  (Dec.)  ;  Del. 
&  Hud.  60  (May)  to  92  (Dec.) ;  Lackawanna 
68  (May)  to  no  (Dec);  111.  Cent.  99  (Jan.) 
to  127  (Dec)  ;  Louis.  &  Nash.  173  (Nov.)  to 
'jy  (Dec)  ;  N.  Y.  Cent.  122  (May)  to  155 
(Dec)  ;  New  Haven  155  (Jan.)  to  180  (Oct.)  ; 
Pullman  107   (Jan.)  to  146  (Jan.). 

1881  AVERAGE  1 10-137 

Cent,  of  N.  J.  ranged  from  82  (Jan.)  to  ii^ 
(Feb.)  ;  St.  Paul  loi  (Feb.)  to  129  (June)  ; 
Del.  &  Hud.  89  (Jan.)  to  115  (Mch.);  Lacka- 
wanna loi  (Jan.)  to  131  (Mch.) ;  111.  Cent. 
124  (Jan.)  to  146  (May)  ;  Louis.  &  Nash.  79 
(Feb.)  to  no  (May) ;  N.  Y.  Cent.  155  (Jan.)  ; 
to  130  (Dec) ;  New  Haven  164  (Mch.)  to  190 
(June);  Pullman  120  (Jan.)  to  150  (Jan.). 


RAXGE  OF  STOCK  MARKET  31 

1882  AVERAGE  94-134 

Cent,  of  N".  J.  ranged  from  93  (Feb.)  to  63 
(Nov.);  St.  Paul  128  (Sept.)  to  96 
(Nov.) ;  Del.  &  Hud.  102  (Mch.)  to  119 
(Aug.) ;  Lackawanna  116  (April)  to  150 
(Sept.);  111.  Cent.  127  (Jan.)  to  150  (Oct.); 
Louis.  &  Nash.  100  (Jan.)  to  46  (Nov.) ;  N.  Y. 
Cent.  123  (May)  to  138  (Aug.)  ;  New  Haven 
168  (Feb.)  to  186  (Feb.);  Pullman  145  (Jan.) 
to  117  (June). 

1883  AVERAGE  103-121 

Cent,  of  N.  J.  ranged  from  68  (Jan.)  to  90 
(Oct.) ;  St.  Paul  108  (Jan.)  to  91  (Dec.) ;  Del. 
&  Hud.  112  (April)  to  102  (Oct.)  ;  Lackawanna 
131  (April)  to  III  (Oct.) ;  111.  Cent.  148  (June) 
to  124  (Aug.) ;  Louis.  &  Nash.  58  (Jan.)  to  40 
(Aug.)  ;  N.  Y.  Cent.  129  (Mch.)  to  in  (Dec.) ; 
New  Haven  169  (Jan.)  to  183  (June) ;  Pull- 
man 134  (June)  to  112  (Dec). 

1884  AVERAGE  80-115 

Cent,  of  N.  J.  ranged  from  90  (Jan.)  to  2J 
(Dec.) ;  St.  Paul  94  (Jan.)  to  58  (June) ;  Del. 
&  Hud.  114  (Feb.)  to  6y  (Dec.)  ;  Lackawanna 
133  (Mch.)  to  86  (Dec);  N.  Y.  Cent.  140 
(Feb.)  to  no  (June) ;  Louis.  &  Nash.  51 
(Mch.)  to  22  (June)  ;  N.  Y.  Cent.  122  (Mch.) 
to  83  (Nov.) ;  New  Haven  184  (May)  to  175 
(July);  Pullman   117   (Jan.)   to  90  (May). 


32  BUSINESS  BAROaiETERS 

1885  AVERAGE  83-113 

Cent,  of  N.  J.  ranged  from  31  (Mch.)  to  52 
(Aug.) ;  St.  Paul  64  (June)  to  99  (Nov.)  ;  Del. 
&  Hud.  66  (Jan.)  to  100  (Nov.)  ;  Lackawanna 
82  (Jan.)  to  129  (Dec.)  ;  111.  Cent.  119  (Jan.)  to 
140  (Dec.)  ;  Louis.  &  Nash.  22  (Jan.)  to  51 
(Nov.)  ;  N.  Y.  Cent.  81  (June)  to  107  (Nov.) ; 
New  Haven  175  (Jan.)  to  204  (Dec.)  ;  Pull- 
man 107  (Jan.)  to  137  (Nov.). 

1886  AVERAGE  102-123- 

Cent.  of,  N.  J.  ranged  from  42  (Jan.)  to  64 
(Sept.);  St.  Paul  82  (May)  to  99  (Sept.); 
Del.  &  Hud.  87  (Jan.)  to  108  (Feb.)  ;  Lack- 
awanna 115  (Jan.)  to  144  (Dec.)  ;  111.  Cent. 
143  (Feb.)  to  130  (Dec.)  ;  Louis  &  Nash.  33 
(May)  to  69  (Dec.)  ;  N.  Y.  Cent.  98  (Mch.)  to 
117  (Oct.) ;  New  Haven  204  (Jan.)  to  223 
(Nov.);  Pullman  128  (May)  to  147  (Oct.). 

1887  AVERAGE  104-124 

Cent,  of  N.  J.  ranged  from  64  (May)  to  47 
(July)  ;  St.  Paul  95  (May)  to  65  (Oct.)  ;  Del. 
&  Hud.  96  (Sept.)  to  106  (Nov.)  ;  Lackawanna 
139  (Jime)  to  123  (Oct.)  ;  111.  Cent.  138  (May) 
to  114  (Oct.);  Louis.  &  Nash.  70  (April)  to 
54  (Oct.);  N.  Y.  Cent.  114  (May)  to  loi 
(Oct)  ;  New  Haven  208  (Feb.)  to  233  (May)  ; 
Pullman  159  (May)  to  136  (Nov.). 


RANGE  OF  STOCK  MARKET  33 

1888  AVERAGE  102-129 

Cent,  of  N.  J.  ranged  from  73  (April)  to  95 
(Dec);  St.  Paul  78  (Feb.)  to  59  (Dec);  Del. 
&  Hud.  103  (Jan.)  to  134  (Dec.)  ;  Lackawanna 
123  (April)  to  145  (Oct.) ;  111.  Cent.  123 
(Aug.)  to  113  (Dec) ;  Louis.  &  Nash.  64  (Jan.) 
to  50  (April);  N.  Y.  Cent.  102  (April)  to  iii 
(Sept.) ;  New  Haven  215  (Jan.)  to  244  (Dec.) ; 
Pullman  135   (April)  to  175   (Sept.). 

1889  AVERAGE  123-144 

Cent,  of  N.  J.  ranged  from  92  (Mch.)  to  131 
(Oct.)  ;  St.  Paul  60  (Mch.)  to  75  (June)  ;  Del. 
&  Hud.  130  (Mch.)  to  156  (Sept.)  ;  Lacka- 
wanna 134  (April)  to  151  (Sept.) ;  111.  Cent. 
106  (Feb.)  to  118  (Dec);  Louis.  &  Nash.  56 
(Jan.)  to  87  (Nov.) ;  N.  Y.  Cent,  no  (Feb.)  to 
104  (July)  ;  New  Haven  241  (Jan.)  to  279 
(Sept.)  ;  Pullman  189  (Jan.)  to  193   (Jan.). 

1890  AVERAGE  98-141 

Cent,  of  N.  J.  ranged  from  128  (May)  to  92 
(Nov.) ;  St.  Paul  78  (May)  to  44  (Nov.) ;  Del. 
&  Hud.  140  (April)  to  120  (Dec.)  ;  Lackawanna 
149  (July)  to  123  (Nov.)  ;  111.  Cent.  120  (Jan.) 
to  85  (Nov.)  ;  Louis.  &  Nash.  92  (May)  to  65 
(Nov.)  :  N.  Y.  Cent,  in  (June)  to  95  (Dec)  ; 
New  Haven  224  (Jan.)  to  270  (June)  ;  Penn- 
sylvania 95  to  113;  Pullman  222  (July)  to  160 
(Dec). 


34  BUSINESS  BAROMETERS 

1891  AVERAGE  95-138 

Cent,  of  N.  J.  ranged  from  122  (April)  to 
105  (June) ;  St.  Paul  51  (Mch.)  to  82  (Dec.) ; 
Del.  &  Hud.  140  (Sept.)  to  120  (Dec.) ;  Lack- 
awanna 130  (July)  to  145  (Sept.)  ;  111.  Cent. 
90  (Mch.)  to  109  (Dec);  Louis.  &  Nash.  65 
(Aug.)  to  83  (Dec.) ;  N.  Y.  Cent.  98  (July)  to 
119  (Dec);  New  Haven  271  (Feb.)  to  24 
(Nov.);  Pennsylvania  99  to  115;  Pullman  196 
(Jan.)  to  172  (Nov.). 

1892  AVERAGE  122-142 

Cent,  of  N.  J.  ranged  from  iii  (Jan.)  to  145 
(Feb.)  ;  St.  Paul  75  (April  to  84  (Aug.)  ;  Del. 
&  Hud.  122  (Jan.)  to  149  (April)  ;  Lacka- 
wanna 138  (Jan.)  to  167  (Feb.)  ;  111.  Cent,  no 
(Jan.)  to  95  (Sept.)  ;  Louis.  &  Nash.  84  (Jan.) 
to  64  (Sept.);  N.  Y.  Cent.  119  (Mch.)  to  107 
(Sept.)  ;  New  Haven  224  (Jan.)  to  252  (June)  ; 
Pennsylvania  106  to  114;  Pullman  184  (Jan.) 
to  200  (May). 

1893  AVERAGE  98-130 

Cent,  of  N.  J.  132  (Jan.)  to  84  (July) ;  St. 
Paul  83  (Jan.)  to  46  (July)  ;  Del.  &  Hud.  139 
(Jan.)  to  102  (July)  ;  Lackawanna  127  (July) 
to  175  (Nov.) ;  111.  Cent.  104  (Jan.)  to  86 
(July)  ;  Louis.  &  Nash.  JJ  (Jan.)  to  39  (Dec.)  : 
N.  Y.  Cent,  in  (Jan.)  to  92  (July)  ;  New 
Haven   262    (Jan.)    to    188    (Sept.)  ;    Pennsyl- 


RANGi:  OF  STOCK  MARKET  35 

vania  93   (Dec.)    to   iii    (Jan.);  Pullman  206 
(April)  to  132  (Aug.). 

1894  AVERAGE  105-123 

Cent,  of  N.  J.  ranged  from  117  (Mch.)  to  87 
(Dec.) ;  St.  Paul  54  (Jan.)  to  67  (Sept.) ;  Del. 
&  Hud.  144  (April)  to  119  (Oct.)  ;  Lackawanna 
174  (Sept.)  to  155  (Oct.) ;  111.  Cent.  95  (Sept.) 
to  82  (Dec.) ;  Louis.  &  Nash.  40  (Jan.)  to  57 
(Sept.) ;  N.  Y.  Cent.  95  (May)  to  102  (Aug.) ; 
New  Haven  178  (July)  to  197  (Dec.)  ;  Pennsyl- 
vania 96  (Jan.)  to  104  (Apr.) ;  Pullman  174 
(Apr.)  to  152  (July). 

1895  AVERAGE  103-128 

Cent,  of  N.  J.  ranged  from  81  (Feb.)  to  116 
(Sept.);  St.  Paul  53  (Mch.)  to  78  (Sept.); 
Del.  &  Hud.  134  (Sept.)  to  118  (Dec);  Lack- 
awanna 174  (Oct.)  to  154  (Dec.) ;  111.  Cent. 
81  (Jan.)  to  106  (Sept.)  ;  Louis.  &  Nash.  66 
(Sept.)  to  39  (Dec.)  ;  N.  Y.  Cent.  104  (Aug.) 
to  90  (Dec.)  ;  New  Haven  218  (June)  to  174 
(Dec.)  ;  Pennsylvania  97  (Jan.)  to  115  (Sept.)  ; 
Pullman  178  (June)  to  146  (Dec). 

1896  AVERAGE  1 00-119 

Cent,  of  N.  J.  ranged  from  87  (Aug.)  to  no 
(Nov.)  ;  St.  Paul  59  (Aug.)  to  80  (Nov.)  ;  Del. 
iSz:  Hud.  129  (Feb.)  to  114  (Aug.)  ;  Lackawanna 
166  (June)  to  138  (Aug.)  ;  111.  Cent.  98  (Jan.) 
to  84  (Aug.)  ;  Louis.  &  Nash.  55  (Feb.)  to  IJ 


36  BUSINESS  BAR03tETERS 

(Aug.);  N.  Y.  Cent.  99  (Feb.)  to  88  (Aug.); 
New  Haven  184  (Jan.)  to  160  (July)  ;  Penn- 
sylvania 99  to  109;  Pullman  164  (Feb.)  to  138 
(Aug.). 

1897  AVERAGE  103-117 

Cent,  of  N".  J.  ranged  from  103  (Jan.)  to  68 
(May)  ;  St.  Paul  69  (April)  to  102  (Sept.)  ; 
Louis.  &  Nash.  99  (April)  to  123  (Sept.) : 
Lackawanna  164  (May)  to  164  (Aug.) ;  111. 
Cent.  91  (April)  to  no  (Aug.)  ;  Louis.  &  Nash. 
40  (April)  to  63  (Sept.)  ;  N.  Y.  Cent.  92  (Feb.) 
to  115  (Sept.)  ;  New  Haven  160  (Feb.)  to  185 
(Sept.);  Pennsylvania  103  (Jan.)  to  119 
(Sept.)  ;  Pullman  152  (Jan.)  to  185  (Sept.) 

1898  AVERAGE  106-133 

Cent,  of  N.  J.  ranged  from  84  (Nov.)  to  99 
(Dec.)  :  St.  Paul  83  (April)  to  120  (Dec.) ; 
Del.  &  Hud.  114  (Feb.)  to  93  (Nov.);  Lack- 
awanna 159  (Feb.)  to  140  (Oct.) ;  111.  Cent. 
96  (April)  to  115  (Dec.)  ;  Louis.  &  Nash.  44 
(April)  to  65  (Dec.)  ;  N.  Y.  Cent.  105  (Mch.) 
to  124  (Dec.)  ;  New  Haven  178  (Jan.)  to  201 
(Dec.) ;  Pennsylvania  no  (Mch.)  to  123 
(Dec);  Pullman  216  (July)  to  132  (Nov.). 

1899  AVERAGE  123-151 

Cent,  of  N.  J.  ranged  from  97  (Jan.)  to  126 
Nov.);  St.  Paul  136  (Sept.)  to  112  (Dec); 
Del.  &  Hud.  106  (Jan.)  to  135  (Sept.)  ;  Lack- 


RAXGE  OF  STOCK  MARKET  37 

awanna  157  (Jan.)  to  194  (Oct.) ;  111.  Cent.  122 
(Jan.)  to  105  (Dec.) ;  Louis.  &  Nash.  63  (Mch.) 
to  88  (Oct.) ;  N.  Y.  Cent.  144  (Mch)  to  120 
(Dec.)  ;  New  Haven  198  (Jan.)  to  222  (April) ; 
Pennsylvania  122  (Jan.)  to  142  (Jan.)  ;  Pull- 
man 156  (Jan.)  to  207  (Oct.). 

1900  AVERAGE  134-165 

Cent,  of  N.  J.  ranged  from  115  (Jan.)  to  150 
(Dec.) :  St.  Paul  108  (June)  to  148  (Dec.) ; 
Del.  &  Hud.  106  (Sept.)  to  134  (Dec.) ;  *Gt. 
Northern  211  (June)  to  276  (Dec);  111.  Cent, 
no  (June)  to  132  (Dec.) ;  Louis.  &  Nash.  68 
(Sept.)  to  89  (Dec.) ;  N.  Y.  Cent.  125  (June) 
to  145  (Dec.) ;  New  Haven  215  (Jan.)  to  207 
(Sept.)  ;  Pennsylvania  124  (Sept.)  to  149 
(Dec.)  ;  Pullman  176  (June)  to  204  (Dec). 

*Great  Northern  is  substituted  here  for  Lack- 
awanna with  the  Ore  Certificates  added  from 
1900  to  1907. 

1901  AVERAGE  148-190 

Cent,  of  N.  J.  145  (Jan.)  to  196  (Dec) ;  St. 
Paul  134  (May)  to  188  (May) ;  Del.  &  Hud. 
185  (April)  to  105  (May)  ;  Gt.  Northern  208 
(Mch.)  to  167  (May)  ;  111.  Cent.  124  (May)  to 
154  (June) ;  Louis.  &  Nash.  "yS  (May)  to  in 
(June)  ;  N.  Y.  Cent.  129  (Jan.)  to  174  (Nov.)  ; 
New  Haven  206  (Feb.)  to  217  (June)  ;  Penn- 
sylvania 161    (April   )to  137  (May) ;  Pullman 


38  BUSEVESS  BAROMETERS 

195  (Jan.)  to  225  (Oct.). 

1902  AVERAGE  168-201 

Cent,  of  N.  J.  ranged  from  198  (Jan.)  to  165 
(Nov.);  St.  Paul  160  (Jan.)  to  198  (Sept.); 
Del.  &  Hud.  184  (Jan.)  to  153  (Nov.);  Gt. 
Northern  181  (Mch.)  to  203  (Dec.)  ;  111.  Cent. 
137  (Jan.)  to  173  (Aug.)  ;  Louis  &  Nash.  102 
(Jan.)  to  159  (Aug.)  ;  N.  Y.  Cent.  168  (Jan.) 
to  147  (Nov.)  ;  New  Haven  209  (Jan.)  to  225 
(April)  ;  Pennsylvania  147  (Jan.)  to  170 
(Sept.);  Pullman  215   (Jan.)   to  250  (April). 

1903  AVERAGE  149-190 

Cent,  of  N.  J.  ranged  from  190  (Jan.)  to  153 
(Oct.);  St.  Paul  183  (Jan.)  to  133  (Aug.); 
Del.  &  Hud.  183  (Feb.)  to  149  (Aug.);  Gt. 
Northern  209  (Jan.)  to  160  (Oct.)  ;  111.  Cent. 
151  (Jan.)  to  125  (July)  ;  Louis.  &  Nash.  130 
(Jan.)  to  95  (Sept.)  ;  N.  Y.  Cent.  156  (Jan.) 
to  112  (July);  New  Haven  225  (Jan.)  to  187 
(May);  Pennsylvania  157  (Jan.)  to  no 
(Nov.)  ;  Pullman  235   (Jan.)   to  196   (July). 

1904  AVERAGE  152-192 

Cent,  of  N.  J.  ranged  from  154  (Feb.)  to  194 
(Nov.);  St.  Paul  137  (Feb.)  to  177  (Dec); 
Del.  &  Hud.  149  (Mch.)  to  190  (Dec.) ;  Gt. 
Northern  170  (Mch.)  to  242  (Dec.)  ;  111.  Cent. 
125  (Feb.)  to  159  (Dec.)  ;  Louis.  &  Nash.  loi 


RANGE  OF  STOCK  MARKET  39 

(Feb.)  to  148  (Dec);  N.  Y.  Cent.  112  (Mch.) 
to  145  (Dec);  New  Haven  185  (May)  to  199 
(Oct.);  Pennsylvania  iii  (Mch.)  to  140 
(Dec);  Pullman  209  (Mch.)  to  242   (Nov.). 

1905  AVERAGE  181-220 

Cent,  of  N.  J.  ranged  from  190  (May)  to  235 
(Oct.) ;  St.  Paul  168  (May)  to  187  (Aug.) : 
Del.  &  Hud.  178  (May)  to  237  (Nov.);  Gt. 
Northern  236  (Jan.)  to  335  (April) ;  111.  Cent. 
152  (Jan.)  to  183  (Sept.)  ;  Louis.  &  Nash.  134 
(Jan.)  to  157  (Sept.)  ;  N.  Y.  Cent.  167  (Mch.) 
to  136  (May)  ;  New  Haven  216  (Sept.)  to  191 
(Dec) ;  Pennsylvania  131  (May)  to  148 
(Aug.)  ;  Pullman  230  (May)   to  258  (Aug.). 

1906  AVERAGE  163-210 

Cent,  of  N.  J.  ranged  from  204  (May)  to  239 
(May);  St.  Paul  189  (Nov.)  to  146  (Dec); 
Del.  &  Hud.  209  (Mch.)  to  189  (May)  ;  Gt. 
Northern  348  (Feb.)  to  178  (Dec.)  ;  111.  Cent. 
164  (May)  to  184  (June)  ;  Louis.  &  Nash.  156 
(Jan.)  to  136  (May) ;  N.  Y.  Cent.  156  (Jan.) 
to  126  (Nov.)  ;  New  Haven  204  (Jan.)  to  189 
(Dec) ;  Pennsylvania  147  (Jan.)  to  122  (July)  ; 
Pullman  270  (Nov.)  to  180  (Dec) 

1907  AVERAGE  1 16-184 

Cent  of  N.  J.  ranged  from  220  (Jan.)  to  144 
(Oct.) ;  St.  Paul  157  (Jan.)  to  93  (Nov.)  ;  Del. 
&  Hud.  22y  (Jan.)  to  124  (Nov.)  ;  Gt.  North- 


40  BUSINESS  BAROMETERS 

ern  274  (Jan.)  to  144  (Nov.) ;  111.  Cent.  172 
(Jan.)  to  116  (Nov.)  ;  Louis.  &  Nash.  145  (Jan.) 
to  85  (Nov.) ;  N.  Y.  Cent.  134  (Jan.)  to  89 
(Nov.)  ;  New  Haven  189  (Jan.)  to  127  (Nov.)  ; 
Pennsylvania  141  (Jan.)  to  113  (Nov.) ;  Pull- 
man 181   (Jan.)  to  137  (Nov.). 

1908  AVERAGE  125-165 
Central  of  N.  J.  ranged  from  229  (Dec.)  to 
160  (Feb.)  ;  St.  Paul  152  (Dec.)  to  103  (Jan.)  ; 
Del.  &  Hud.  181  (Dec.)  to  141  (Feb.);  Gt. 
Northern  223  (Dec.)  to  162  (Feb.)  ;  Illinois 
Central  150  (Nov.)  to  122  (Feb.) ;  Louis.  & 
Nash.  126  (Dec.)  to  87  (Feb.) ;  N.  Y.  Cent. 
126  (Dec.)  to  90  (Jan.) ;  New  Haven  161  (Nov.) 
to  128  (Jan.)  ;  Pennsylvania  132  (Dec.)  to  109 
(Jan.)  ;  Pullman  174  (Jan.)  to  147  (Jan.). 

Possibilities  of  Profit  in  Conservative  In- 
vestment Stoclcs. 

Suppose  $2,500  had  been  invested  in  i860,  in 
the  stocks  given  in  the  preceding  pages,  and  they 
had  been  bought  and  sold  again,  every  three  or 
four  years,  what  would  have  been  the  history  of 
that  $2,500?  To  what  would  it  have  amounted 
to-day  ? 

In  detail  the  answer  would  be  as  follows: 
Starting  in   1861   with  an  original  principal  of 


POSSIBILITIES  OF  PROFIT  41 

$2,500  and  the  interest  (we  use  only  simple  in- 
terest instead  of  compound  interest)  for  three 
and  one-half  years  at  5%, amounts  to  $438.00. 
The  $2,500  we  invest  in  the  leading  stocks  of 
1 86 1  at  their  average  low  price  (as  given  in  the 
preceding  chapter)  of  60,  and  hold  the  stocks 
for  said  3^  years  until  the  average  price  reach- 
es I60  in  1865,  when  we  sell  for  $6,56o  which* 
together  with  the  interest  above  mentioned* 
makes  a  total  of  $6998.  We  leave  thb  amount 
on  deposit  in  a  bank  for  two  years  at  4%, so  that 
we  have  $7,569  to  invest  in  1867  when  the  av- 
erage again  falls  to  100.  We  think  that  with 
this  introduction  the  table  is  self-explanatory. 

Original       Principal      in- 
vested @  60%     1861       $  $2,500 

Dividends  3  J  yrs.  @  5%  to    1865  438 

Prin.  bought   @  60-1681 

sold  @  160    1865  6,560 

Total  of   Prin.    &   Divi- 
dends @  5% 1865  6,998 

Comp.  Int.  @  4%  2  yrs. 

P.  &I 1867  7.569 

Invested  at  100  in  1867  . . 

Dividends  2  yrs.  @  5%  to      1869  756 

Prin.  bought  @  100-1867 
sold  160 1869  12,000 

Total  of  Prin.  and  Divi- 
dends @  5% 1869  12,756 


42  BUSINESS  BAROMBTEHS 

Comp.  Int.  @  4%  4  yrs. 

P.  &I 1873  14,920 

Invested  at  75  in  1877 

Dividends  i  yr.  @  5%  to       1874  746 

Prin.   bought   @  75-1873 

sold  @  no   1874  21,780 

Total  of  Prin.   &  Divs. 

@  5%  to   1874  22,526 

Comp.  Int.  @  4%  3i  yrs. 

P-   &  1 1877  25,844 

Invested  at  50  in  1877. 

Dividends  4  yrs.  @  5%  to      1881  5,168 

Prin.   bought   @   50-1877 

sold  @  140    1881  72,240 

Total  of  Prin.  and  Divs. 

@5%   1881  77,408 

Comp.  Int.  @  4%  4  yrs. 

P.   &  1 90,442 

Invested   at   85   in     1885 

Dividends  4  yrs.  @  5%  to      1889  18,108 

Prin.   bought   @  85-1885 

sold  @  140    1889  149,100 

Total  of  Prin.   and     Divs 

@  5%    1889  167,208 

Comp.  Int.  @  4%  li  yrs. 

P.   &I 1891  177,275 

Invested  at  95  in   1891. 

Dividends  i  yr.  @  5%  to       1892  8,868 

Prin.   bought   @  95-1891 

sold  @  140  1892  261,380 

Total  of  Prin.  and  Divs. 

©5%    1892  270,248 

Comp.  Int.  @  4%  5  yrs. 

P.   &I 1897  328,794 


POSSIBILITIES  OF  PROFIT  43 

Invested  at  lOO  in  1897. 

Dividends  6  yrs.  @  5%  to      1903         98,634 

Prin.  bought  @>  100-1897 

sold  @  200   1903         657,400 

Total   of    Prin.    &   Divs. 

@5%   1903  756,034 

Comp.  Int.@  4%  I  yr.P.  &  1. 1904  786,275 

Dividends  3  yrs.  @  5% 

through  Dec 1906  117,939 

Princ.  bought  @  152-1904 

sold@2ioin  Dec 1906       1,100,610 

Total  of  Prin.  &  Divs.  @ 

5%  through  Dec 1906  1,218,549 

Comp.  Int.  @  4%  I  yr.  to 

Dec.  P.  &  1 1907  1,267,391 

Divs.  I  yr.  &  i  mo.  @  5% 

to  Jan 1909         68,645 

Principal  165  in  Jan.  . . .     1909       1,802,625 

In  the  above  table  5%  is  allowed  as  an  av- 
erage dividend  on  the  stocks  held  and  4%  an 
average  interest  on  the  bank  deposits.. 

The  preceding  example  shows  that  $2,500  con- 
servatively invested  in  a  few  standard  stocks 
about  forty-eight  years  ago  would  today  amount 
to  over  $1,800,000.  These  not  only  are  strictly 
investment  stocks,  but  also  are  stofcks  which 
have  fluctuated  comparatively  little  in  price.  This, 
moreover,  was  possible  by  giving  orders  to  buy 
or  sell  only  once  in  every  three  or  four  years. 

If  other  stocks,  which  were  not  dividend  pay- 
ers, but  which  have  shown  greater  fluctuations, 
were  purchased,  and  advantage  had  been  taken 


44  BUSINESS  BAROMETERS 

of  the  intermediate  fliictuations,  the  $2,500  would 
have  amounted  to  much  larger  figures.  By  in- 
termediate movements  is  not  meant  the  weekly 
movements  which  the  ordinary  professional  op- 
erator notes,  but  the  broader  movements  ex- 
tending over  many  months  and  possibly  a  year 
or  more.  Nevertheless,  these  intermediate  move- 
ments should  not  be  noticed  by  a  conservative 
investor,  as  it  is  possible  to  correctly  diagnose 
only  the  major  movements  extending  over  three 
or  four  years.  However,  many  brokers  believe 
that  it  is  possible  to  discern  also  these  intermed- 
iate movements  of  six  or  eight  months;  and  if 
so  the  following  results  would  be  possible." 

$5,000  invested  in  "St.  Paul"  in  1870  would 
amount  to  over  $10,000,000  today. 

$5,000  invested  in  "Union  Pacific"  in  1870 
would  amount  to  over  $15,000,000  today. 

$5,000  invested  in  "Central  of  New  Jersey" 
would  amount  to  over  $30,000,000  today. 

$5,000  invested  in  "Northern  Pacific"  would 
amount  to  over  $50,000,000  today. 

These  figures,  moreover,  are  not  based  on  the 
supposition  of  the  investor  selling  at  the  top  of 
every  rise  or  buying  at  the  bottom  of  every 
decline;  but  that  the  purchaser  receives  only  an 
average  "high"  and  average  "low."  A  con- 
servative investor,  however,  will  not  "put  all  his 


POSSIBILITIES  OF  PROFIT  45 

eggs  into  one  basket,"  especially  in  a  speculative 
basket;  for,  if  one  can  build  an  investment  of 
$5,000  up  to  $1,000,000  in  about  thirty  years 
with  little  risk,  he  is  satisfied  and  will  not,  for 
the  sake  of  obtaining  greater  profits,  assume 
additional  risk. 

Not  only  is  it  possible  to  create  a  fortune 
through  conservative  investments,  but  this  is 
practically  the  only  method  which  is  safe  and 
can  be  depended  upon.  This  is  owing  to  the  fact 
that  all  other  methods  come  under  the  head  of 
"accumulation  by  arithmetical  progression" 
rather  than  "accumulation  by  geometrical  pro- 
gression." 

In  order  to  build  an  investment  of  $5,000  up 
to  $1,000,000  in  thirty  years  by  earning  and 
saving,  a  man  must  accumulate  about  $25,000 
a  year,  or  $100,000  continually  every  four  years, 
without  a  break.  This  is  almost  an  impossibility 
so  far  as  the  average  man  is  concerned  and  the 
feat  is  simply  made  greater  or  less  in  direct  pro- 
portion to  the  amount.  That  is,  to  build  up  a 
fortune  of  $200,000  requires  a  laying  aside  of 
several  thousand  dollars  every  year  in  addition 
to  allowing  all  interest  to  accumulate  and  to 
build  up  a  fortune  of  a  few  millions  requires  that 
one  should  make,  exclusively  in  his  business, 
more  money  each  year  than  almost  any  one  man 


46  BUSINESS  BAR03IETEKS 

who  holds  no  stocks  or  bonds  is  making  in  his 
business  today. 

This  can  best  be  illustrated  as  follows: — If 
one  has  $i,ooo  invested  in  only  ten  shares  of 
stock,  it  does  not  seem  very  wonderful  for  it  to 
double  in  value  in  three  or  four  years,  enabling 
its  sale  for  $2,o(X),  which  is  at  a  profit  of  $i,ooo. 
This  is  due  to  the  fact  that  one  is  accustomed 
to  the  thought  of  handling  $i,ooo;  yet  with  $ioo,~ 
ooo  in  the  same  stock,  it  would  just  as  surely 
become  $200,000,  giving  a  profit  of  $100,000. 

In  other  words,  at  the  beginning  there  is  little 
-difference  between  "Arithmetical"  and  "Geo- 
metrical" Progression,  as  $1,000  added  to 
$1,000  amounts  to  $2,000,  the  same  as  if  mul- 
tiplied by  two.  After  accumulating  $100,000, 
however,  it  makes  a  tremendous  difference 
whether  one  adds  $1,000  making  the  amount 
$101,000,  or  multiplies  said  amount  by  two,  mak- 
ing the  amount  $200,000,  It  is  for  this  reason, 
that  it  is  not  only  possible  to  create  a  great  for- 
tune through  conservative  invesments,  but 
that  this  is  probably  the  safest  way  it  can  be  ac- 
complished. 

A  further  illustration  of  the  difference  between 
"Arithmetical"  and  "Geometrical"  Progression 
may  be  more  striking,  viz : 

By  Arithmetical  Progression  only  about  150,- 
000     days    have  elapsed  since   Columbus   dis- 


POSSIBILITIES  OF  PROFIT  47 

covered  America  and  only  about  1,000,000 
hours  have  elapsed  since  George  Washing- 
ton was  president  of  the  United  States. 

By  Geometrical  Progression:  $5,000  invested 
in  Union  Pacific  stock  in  1870  would  today 
amount  to  $50,000,000  provided  the  holder  once 
or  twice  a  year  sold  his  holdings  or  reinvested 
his  money  according  to  market  conditions. 

The  Possibilities  of  Profits  in  Bonds 

For  the  benefit  of  readers  who  confine  their 
purchases  strictly  to  bonds,  the  following  tables 
will  be  found  of  great  interest.  Although  bonds 
do  not  present  nearly  as  great  an  opportunity 
for  profit  as  stocks,  yet  it  will  be  seen  that  there 
is  often  an  opportunity  of  obtaining  an  average 
profit  of  from  10%  to  20%  in  addition  to  the 
interest  received. 

From  every  point  of  view  a  study  of  these 
tables  clearly  shows  that  the  study  of  Funda- 
mental Statistics  is  of  great  value  even  to  the 
banker  or  investor  who  purchases  only  bonds. 
If  he  buys  with  the  idea  of  selling  again,  a  study 
of  Fundamental  Statistics  is  absolutely  essential. 
If  one  buys  for  permanent  investment  only,  the 
study  is  not  essential  but  by  showing  a  purchaser 
when  to  buy,  Fundamental  Statistics  will  save 
him  an  average  of  about  10%  on  all  purchases.  In 
order  that  the  reader  may  not  think  that  these 
tables'  were  prepared  by  us  in  the  interests  of 
the  study  of  Fundamental  Statistics  we  take 
pleasure  in  stating  that  they  were  prepared  by 
a  leading  New  York  investment  house;  whose 
natural  object  would  be  to  show  that  bonds 
fluctuate  very  little. 


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53 


CHAPTER  III. 

COMMODITY   PRICES   SINCE)   1860  AND  PROFIT   POS- 
SIBILITIES   ]?0R    MERCHANTS. 

knowledge  of  Fundamental  Statis- 
tics is  as  important  to  merchants 
and  manufacturers  as  to  the  inves- 
tor. The  commodity  market  offers 
almost  as  great  an  opportunity  for 
profit  as  the  stock  market.  Capital  invested  in 
commodities  should  not  depend  upon  chance  for 
its  development.  To  the  merchant  or  anyone 
else  interested  wholly  or  in  part  in  the  price 
movement  of  crops,  manufactures,  raw  material 
or  merchandise,  general  figures  on  underlying 
conditions,  controlling  demand  and  supply,  are 
essential. 

To  know  when  to  buy  and  when  to  sell  com- 
modities, in  order  to  take  advantage  of  the  larger 
swings  of  the  market,  the  merchant  must  know 
what  the  present  conditions  are  and  which  way 
the  pendulum  is  swinging.  To  know  how  soon 
to  curtail  credits  extended  to  customers,  and  call 
in  the  cash  that  will  be  needed  to  save  his  cap- 
ital, when  loans  cannot  easily  be  renewed,  he 
must  watch  underlying  conditions.  Keeping  his 
eyes  only  on  the  details  of  his  own  business  will 


RANGE  OF  COamODlTY  MARKET  55 

not  enable  him  to  avoid  "hard  times."  Moreover, 
by  broadening  his  study,  he  is  able  greatly  to 
increase  his  profits,  as  well  as  to  eliminate  losses. 

The  study  of  twenty-five  important  factors  like 
those  described  in  subsequent  chapters  of  this 
book,  by  methods  similar  to  those  there  out- 
lined, results  in  the  perception  of  clearly  de- 
fined industrial  movements  in  the  past  and  shows 
the  bearing  these  factors  are  having  to-day  in 
commerce  and  industry,  as  well  as  on  the  mone- 
tary and  stock  market  outlook.  Great  fortunes 
have  been  made,  the  history  of  which  revealed 
the  fact  that  their  possessors  had  a  very  accurate 
knowledge  of  approaching  conditions,  because  of 
a  keen  understanding  of  underlying  conditions. 

As  an  illustration  of  possible  profits  that  can 
be  made  simply  by  the  purchase  and  sale  of  com- 
modities in  connection  with  a  study  of  Funda- 
mental Statistics,  the  following  problem  is  sub- 
mitted. Starting  with  a  capital  of  a  little  over 
fifty  thousand  dollars,  ten  commodities  were  sel- 
ected for  purchasing.  Bought  first  in  i860,  they 
were  sold  and  bought  again  at  intervals  of 
from  three  to  seven  years,  according  to  what  the 
figures  on  "underlying  conditions"  indicated.  The 
prices  used  are  those  given  in  the  closing  para- 
graphs of  this  chapter  and  no  departure  from  the 
years  selected  was  made,  except  where  there  was 


56  BUSINESS  BAROMETERS 

a  choice  of  either  of  two  years.  In  such  cases,  it 
was  assumed  that  the  purchaser  would  buy  later, 
sell  earlier,  or  leave  more  cash  on  deposit  as  the 
conditions  warranted.  The  original  proportion 
of  the  different  articles  has  been  kept  the  same; 
and  the  sum,  added  to  the  principal  on  deposit  in 
the  intervals  between  buying  and  selling,  has  been 
reckoned  at  simple  interest  at  4%.  Since  all 
commodities  are  not  affected  alike  by  the  same 
conditions,  slight  losses  were  allowed  to  occur 
as  they  would  naturally.  The  resulting  amount 
shows  that  in  about  forty-five  years,  $53,755.10 
becomes  $802,618.41;  or  that  $1,000,000  would 
become  $15,400,000.  By  working  a  similar  prob- 
lem with  a  single  commodity,  there  would  also 
be  a  distinct  profit;  for  example,  if  $53,000  was 
invested  in  iron  in  i860,  it  would  have  equalled 
to-day  about  $2,000,000.  This  clearly  demon- 
strates that  even  the  great  mercantile  fortunes 
have  been  acquired  by  taking  advantage  of  the 
same  laws  and  changes  that  give  opportunities  of 
profit  to  the  banker  and  the  investor. 

Problem  Illustrating  Profits  Derived    From  Trans- 
actions in  Commodities    Using    Fundamental 
Statistics  as  a  Guide  to  When  to  Buy  and  Sell, 
1860  to  1909. 


RANGE  OF  COMMODITY  MARKET  57 

Basis:  i,ooo  tons  iron;  5,000  bushels  wheat; 
5,000  bushels  corn;  10,000  lbs.  cotton;  10,000  lbs. 
sugar;  10,000  lbs.  wool;  10,000  lbs.  coffee;  1,000 
lbs.  rubber ;  500  barrels  pork ;  10,000  lbs.  copper. 

PRICES  SAME  AS  AT  END  OF  CHAPTER. 

Original        Purchase 

i860  $53755-10 

First  Sales    1864  132,623.25 

Capital  on  Dep.  3  yrs. 

@4%  simp.  int.  P 

&  I     1867  148,538.04 

Second   Purchase 

1868   $145,746,331-3 

Sales  (+8-9)   ..1872      168,198.00 
Int.  on  $2,792.71   @ 

4%  P  &  I...  1872         3.351 -25 
Amt.  of  capital  after 

2nd  Transaction. . .  171,549.25 

Capital   on  deposit  5 

yrs.  4%  P  &  I  1877  205,859. 10 

Third  purchase 

1878     202,942.08 

Sales  (+4.9)    ..1882     288,585.50 
Int.       on      $2,917.02 

3  yrs.  @  4%  P  &  I 

1882         3,267.06 


58  BUSINESS  BAROMETERS 

Amt.  of  capital  after 

3rd.  transaction   ..  291,852.56 

Capital  on  dep.  2  yrs. 

4%  P  &I  ...1884  315.200.76 

Fourth    Purchase 

1885     314,448.00 

Sales   (+8)    ...1892     338,746.00 
Int.  on  $752.76  7  yrs. 

4^0  P  &  I  ...1892  963-53 

Amount  of  Capital  af- 
ter 4th  transaction  339709 -93 
Capital  on  dep.  3  yrs. 

@4%P&I..i896  380,475.12 

Fifth  purchase 

....1896     377,907.20 
.1902     574745-60 
Int.  $2,567.92  6  yrs. 

4%  P  &  I  ...1902         3.184.22 
Amount  of  capital  af- 
ter 5th  transaction  577.929-82 
Capital     on     deposit 

year.  4%  P  &  I  1904  601 ,047  12 

Sixth  Purchase 

1904     600,315.00 

Int.  on  $732.01  3  yrs. 

P  &  I    1907  819.85 

Amount  of  capital  af- 
ter 6th  transaction  771.748.47 


RANGE  OF  COMMODITY  MARKET  59 

Capital  on  Deposit  i 

yr.  4%    P  &  I  to 

Jan.  I,  1909  802,618.41 

When  one  realizes  that  if  a  capital  of  $50,000 
could  have  been  increased  to  over  $800,000  in 
less  than  fifty  years,  simply  by  a  study  of  Funda- 
mental Statistics  and  without  borrowing  any 
money  or  purchasing  any  but  suitable  commod- 
ities, the  great  value  of  this  subject  to  the  mer- 
chant becomes  evident.  This  moreover  is  accom- 
plished without  any  salesman,  overhead  charges, 
or  any  employees.  If  to  these  figures  we 
should  add  the  natural  profit  derived  from 
buying  at  wholesale  and  selling  at  retail,  or  an 
average  manufacturing  profit,  the  $50,000  would 
become  nearly  $20,000,000.  Thus  a  capital  of 
$2,500  would  accrue  to  over  $1,000,000  by  com- 
bining either,  the  manufacturer's  or  retailer's 
profit  with  a  knowledge  of  Fundamental  Statis- 
tics. 

The  largest  manufacturmg  and  mercantile 
firms  collect  data  under  twelve  headings,  or  on 
about  twenty-five  subjects,  as  follows : 

I.  Building  and  Real  Estate:  (i)  Building 
Operations  and  Fire  Losses ; 

II.  Money  Conditions:  (2)  Money  in  Circu- 
lation,^ (3)  Comptroller's  Reports,  (4)  Loans  of 
the  Banks,   (5)   Cash  Held  by  the  Banks,   (6) 


60  BUSINESS  BAROMETERS 

Deposits   of   Banks,    (7)    Surplus    Reserves    of 
Banks ; 

III.  Bank  Clearings:  (8)  Total  Bank  Clear- 
ings, (9)  Bank  Clearings  Excepting  New  York; 

IV.  Investment  Market:  (10)  Stock  Exchange 
Transactions,  (11)  New  Securities; 

V.  Business  Failures:  (12)  Failures,  by 
number,  amount  and  percentage ; 

VI.  Lahor  Conditions:  (13)  Immigration 
Figures ; 

VII.  Foreign  Trade:  (14)  Imports;  (15) 
Exports,  (16)  Balance  of  Trade ; 

VIII.  Gold  Moz'ements:  (17)  Gold  Exports 
and  Imports,  (18)  Domestic  and  Foreign  Money 
Rates,  and  Exchange; 

IX.  Social  Conditions:  (19)  Political  Factors; 

X.  Commodity  Prices:  (20)  Production  of 
Gold:  (21)  Commoidty  Prices. 

XI.     Condition   of  Crops:    (22)    Crop   Condi- 
tions and  other  Commodity  Production. 
XII.     Railroad  Earnings:   (23)   Gross  and  Net 
Earnings;  (24)  Idle  Car  Figures;  (25)  Miscel- 
laneous. 

There  are,  however,  many  firms  and  corpora- 
tions which  do  not  care  to  collect  figures  in  such 
detail,  and  they  have  consolidated,  rearranged  and 
reduced  these  twenty-five  subjects  to  twelve,  as 
follows : — 


RANGE  OF  COMMODITY  MARKET  61 

Building  Operations  as  determined  by  New 
Railroad  Constructed. 

Money  Market  as  determined  by  surplus 
reserves  or  Rates. 

Mercantile  Trade  as  determined  by  Bank 
Clearings. 

Investment    Market    as     determined    by 
Stock  Market  Prices. 

Failures; — the    Ratio    to    the   number    of 
Concerns  in  Business. 

Labor  Conditions  as  determined  by  Immi- 
gration Figures. 

Exports  and  Imports  as  determined  by  the 
Total  Foreign  Trade. 

Gold  Mozements  and  the  Financial  Condi- 
tion of  Foreign  Countries. 

Social  Statistics  with  notes  on  Religious 
and  Political  Conditions. 

Crops  determined  by  the  total  Production 
of  Wheat  and  Corn. 

Commodity  Prices  as  determined  by  the 
Price  of  Pig  Iron. 

General  Summary  as  determined  by  Rail- 
road Earnings. 
*These  are  not  always  tabulated  nor  plotted. 
Many  claim  that  these  twelve  subjects,  when 
properly  studied,  cover  all  the  field  covered  by 
the  twenty-five  subjects  above  mentioned.     For 


*9 


10, 

II 

=  12 


62  BUSINESS  BAROMETERS 

instance;  instead  of  studying  both  ''Building 
Operations,"  and  "Railroad  Earnings,"  they  study 
"Miles  of  New  Railroad  Constructed,"  claiming 
that  this  one  subject  shows  all  that  the  first  men- 
tioned two  subjects  show.  In  the  same  way,  instead 
of  studying  "Exports"  and  "Imports"  separately, 
they  add  them  together  and  study  the  "Foreign 
Trade."  In  fact,  these  ten  subjects  have  by  cus- 
tom come  to  be  known  among  merchants  as  the 
ten  Barometers  of  Trade.  Each  is  important 
enough  in  extent  to  reflect  by  its  good  or  bad 
state  present  economic  conditions  and  likewise 
so  sensitive  to  coming  events  as  to  unerringly 
foretell  good  or  bad  times. 

The  number  of  miles  of  new  railroad  construc- 
ted gives  a  clew  not  only  to  what  new  construc- 
tion work  is  going  on  throughout  the  country, 
but  also  to  railroad  earnings,  as  new  construction 
increases  and  decreases  constantly  with  the  in- 
crease and  decrease  in  earnings.  Moreover,  many 
claim  it  is  possible  to  forecast  railroad  earnings 
by  the  increase  and  decrease  in  the  new  mileage 
constructed.  As  to  the  value  of  figures  on  rail- 
road earnings  or  new  mileage  constructed,  it  is 
universally  admitted  that  they  give  a  wonderful 
index  of  the  times.  Practically  all  manufactured 
goods,  and  even  the  supplies  in  the  local  retail 
stores,  are  shipped  by  the  railroads ;  therefore,  a 


RANGE  OF  COMMODITY  MARKET  63 

weekly  record  of  freight  which  the  railroads  are 
carrying  serves  as  a  barometer  of  the  business  of 
all  the  farmers,  manufacturers  and  merchants  of 
the  country.  Moreover,  the  steel  companies,  the 
car  and  locomotive  builders,  the  coal  industry  and 
one  hundred  other  industries  are  directly  depend- 
ent on  the  railroads  for  their  prosperity.  There- 
fore, all  merchants  watch  railroad  earnings  and 
new  mileage  constructed  and  always  reduce  or 
increase  their  stock  of  goods  in  accordance  with 
what  these  reports  show. 

Money  is  the  basis  of  all  trade-»and  therefore 
is  probably  the  most  sensitive  of  all  barometers. 
Money  is  the  representative  in  value  of  all  things 
traded  in  and  the  scarcity  of  it  seriously  hampers 
the  manufacturer  and  merchant.  Low  money 
rates  usually  indicate  poor  present  conditions  but 
tending  toward  improved  business;  while  high 
money  rates  usually  signify  very  prosperous  pres- 
ent conditions  but  often  foretell  a  coming  panic. 
The  active  merchant,  however,  not  only  studies 
the  money  rates  of  this  country,  but  also  the  rates 
of  the  banks  of  Erigland,  France  and  Germany, 
Each  week  the  Bank  of  England  publishes  a 
statement  and  makes  an  announcement  as  to  the 
rate  of  discount  at  which  it  will  handle  first- 
class  paper  until  further  notice.  This  practically 
fixes  the  discount  rate  throughout  Great  Britain 


64  BUSINESS  BAROMETERS 

and  a  continued  increase  or  decrease  of  the  rate 
in  England,  is  sure  to  be  followed  eventually  by 
a  similar  movement  in  this  country. f- 
r  The  bank  clearings  are  an  extremely  good 
barometer  of  present  conditions  and  are  watched 
with  keen  interest  by  all  successful  merchants 
and  manufacturers.  Many  large  concerns  each 
week  compare  the  changes  in  their  total  sales  with 
the  changes  in  the  total  bank  clearings  of  the 
country.  If  they  find  that  bank  clearings  continu- 
ally show  an  increase  while  their  sales  remain 
fixed,  they  immediately  endeavor  to  ascertain  the 
reason  therefore.  Moreover,  some  firms  divide 
the  country  into  sections  and  compare  by  sections 
their  sales  with  the  bank  clearings,  thus  having  a 
check  on  the  work  of  each  individual  sales  office. 
The  transactions  and  prices  of  the  stocks  on 
the  New  York  Stock  Exchange  are  classed  by 
some  with  politics,  money  and  crops.  The  way 
that  money  is  made  on  the  New  York  Stock 
Exchange,  is  by  anticipating  price  changes.  The 
leading  operators  have  statisticians  continually 
studying  underlying  conditions  in  order  to  fore- 
cast future  conditions  and  base  their  purchases 
and  sales,  on  the  information  obtained.  There- 
fore, a  slowly  sagging  market  usually  precedes 
a  period  of  depression  in  general  business;  and 
a  slowly  rising  market  usually  precedes  prosper- 
ous business  conditions,  unless  the  decline  or  rise 


RANGE  OF  COMMODITY  MARKET  65 

is  artificial  or  caused  by  manipulation.  In  fact, 
if  it  was  not  due  to  manipulation,  merchants 
could  almost  rely  on  the  stock  market  alone  as  a 
barometer  and  let  these  large  market  operators 
stand  the  expense  of  collecting  the  data  necessary 
for  determining  underlying  conditions.  Unfor- 
tunately, however,  it  is  often  impossible  to  dis- 
tinguish between  artificial  movements  and  natural 
movements;  therefore,  although  merchants  may 
watch  the  stock  market  as  one  of  the  bar- 
ometers, yet  they  can  give  to  it  safely  only  a 
small  amount  of  weight. 

Failures,  both  in  number  and  amount,  are  es- 
pecially good  barometers  of  the  condition  of  the 
retail  trade.  By  ascertaining  each  month  the 
average  number  of  concerns  in  active  business 
and  the  number  that  have  failed,  the  percentage 
of  failures  may  be  readily  determined.  A  detailed 
discussion  of  this  subject  will  be  found  in  Chap- 
ter VI  of  this  book. 

Figures  on  immigration  are  carefully  studied 
by  manufacturers  as  indicative  of  the  condition 
of  the  labor  market.  Thousands  of  immigrants 
arriving  at  Ellis  Island  indicate  good  present  con- 
ditions, with  high  prices  for  labor,  up  to  a  certain 
point;  but  too  large  immigration  figures  foretell 
a  change  in  conditions  followed  by  a  period  of 
depression.    On  the  other  hand,  when  large  num- 


66  BUSINESS  BAROMETERS 

bers  of  steerage  passengers  are  leaving  the  coun- 
try and  the  incoming  steerage  is  reduced,  business 
is  in  a  state  of  depression,  although  when  the 
tide  turns,  and  immigrants  again  begin  to  ar- 
rive, it  is  a  sign  that  conditions  are  improving. 

As  the  bank  clearings  are  used  in  diagnosing 
present  conditions,  figures  on  foreign  trade  are  of 
great  value  in  forecasting  future  conditions.  The 
foreign  trade  of  the  country  bears  the  same  rela- 
tion to  the  nation  as  a  whole,  as  the  retail  sales 
of  a  store  bear  to  the  financial  condition  of  the 
proprietors.  A  retailer  who  for  any  great  length 
of  time  spends  more  money  than  he  receives,  is 
sure  to  eventually  have  trouble,  and  it  is  the 
same  with  a  nation.  Moreover,  as  the  prosperity 
of  the  merchant  is  almost  in  direct  proportion 
to  his  sales,  so  is  the  prosperity  of  a  nation  very 
largely  dependent  upon  its  volume  of  foreign 
trade. 

Although  gold  movements  are  very  important 
for  study  in  forecasting  money  rates,  they,  like 
idle  car  figures,  are  of  no  value  after  the  actual 
figures  for  rates  are  known.  Therefore  no  furth- 
er reference  is  made  to  them  in  this  chapter. 

Regarding  politics:  Trade  is  always  depend- 
ent upon  the  wise  conduct  of  our  national 
government.  War  clouds,  even  although  at  first 
not  involving  our  own  nation,  strongly  affect  all 


RAXGE  OF  COMMODITY  3IARKET  67 

commodity  prices.  Of  course  all  are  not  affected 
in  the  same  way,  as  a  war  scare  increases  the 
prices  of  some  commodities  and  reduces  the  prices 
of  others,  but  all  are  affected  in  some  way  and 
to  some  extent.  Even  the  President's  message 
and  especially  tariff  discussion  and  the  approach 
of  a  presidential  election,  greatly  affect  com- 
modity prices. 

Of  all  statistics  published  by  the  government 
the  most  important  to  the  merchant  are  the  Crop 
Reports.  Most  of  the  government  figures  refer 
to  what  has  happened  in  the  past,  and  many  of 
these  figures  are  published  a  year  or  more 
after  the  events  happen.  In  the  case  of  the  crops 
however  the  government  actually  forecasts,  there- 
fore all  crop  statistics  are  especially  valuable  to 
manufacturers  and  merchants. 

The  crops  are  the  mainstay  of  America, 
because  approximately  one-half  of  our  popu- 
lation is  dependent  upon  agriculture.  Crop 
conditions  form  the  basis  of  James  J.  Hill's  pre- 
dictions and  business  ventures,  and  probably  Mr. 
Hill  is  one  of  our  greatest  students  of  Fundamen- 
tal Statistics.  The  principal  crops,  grain  and 
cotton,  have  a  tremendous  influence  upon  our 
wealth.  Many  industries  and  mercantile  firms 
are  absolutely  dependent  on  the  crops,  and  com- 
modity prices  are  always  more  or  less  dependent 
thereon.     The  grain  reports  and  cotton  reports 


68  RANGE  OF  CpMMODlTY  MARKET 

issued  by  the  government  are  watched  with  great 
interest  and  manufacturers  ^nd  merchants  even 
watch  the  weather  reports  throughout  the  west, 
the  progress  of  the  bollworm,  the  condition  of 
crops  in  the  Argentines  and  Rvissia  and  lOther 
countries.  Good  crops  usually  foretell  continued 
prosperity,  but  poor  crops  are  usually  followed 
by  a  year  of  uncertain  conditions. 

Statistics  on  the  iron  industry  are  useful  for  a 
number  of  reasons.  It  is  generally  admitted  that 
they  give  a  key  to  present  and  future  conditions 
better  than  figures  on  any  other  one  commodity. 
The  exactness  with  which  business  conditions 
could  have  been  foretold  in  the  past  by  figures  on 
the  production  and  price  per  ton  of  pig  iron,  is 
truly  marvelous.  Moreover,  iron  is  one  of  the 
first  commodities  to  fall  in  price  and  the  first  to 
rise ;  therefore  all  merchants  watch  the  price  of 
iron. 

Railroad  earnings  are  extremely  instructive 
and  are  used  by  some  merchants  in  place/Df  some 
of  the  above  subjects.  The  most  acceptaole  meth- 
od is  to  use  them  as  a  check  on  or  as  supple- 
mentary to  said  subjects.  \ 

Therefore  each  of  these  twelve  subjects  is  inti- 
mately bound  up  with  what  is  known  as  "swings" 
during  which  commodity  prices  change  from 
"high"  to  "low"  and  the  reverse.    The  history  of 


BUSIXESS  BAROMETERS  69 

all  mercantile  trade  during  the  past  two  hundred 
years  has  been  divided  into  distinct  cycles  and 
each  cycle  consists  of  four  periods;  a  period  of 
prosperity,  a  period  of  decline,  a  period  of  depres- 
sion, and  a  period  of  improvement.  Each  period 
is  accompanied  with  distinct  changes  in  commod- 
ity prices  and,  by  comparison  with  similar  periods 
in  previous  cycles,  it  is  possible  to  determine  with 
a  measurable  degree  of  certainty  at  about  what 
period  in  one  of  these  '^swings"  we  happen  to  be. 
If  the  swing  of  the  pendulum  is  far  out  over  the 
perpendicular,  we  are  sure  that  it  must  "swing" 
just  as  far  back  of  the  centre  as  forward. 

The  suggestion  made  earlier  in  this  book,  must, 
however,  be  distinctly  borne  in  mind.  No  coun- 
try can  be  prosperous  unless  it  is  progressive.  No^^ 
nation  can  stand  still;  it  must  go  either  forward 
or  backward.  Therefore,  the  normal  demands  of 
a  country  for  new  construction  must  show  an 
increase  each  year  to  have  conditions  even  re- 
main constant.  There  must  be  a  distinct  increase 
in  order  to  keep  the  vast  number  of  our  new  citi- 
zens busy.  Therefore,  in  comparing  the  present 
with  the  past  a  similar  figure  does  not  necessarily 
mean  better  conditions;  but  in  many  instances 
may  mean  an  actual  falling  off.  This  is  very 
important  and  must  be  remembered.  The  reader, 
however,  will  find  these  subjects  discussed  in 
detail  in  a  later  chapter. 


70  BUSINESS  BAROMETERS 

Although  it  is  not  to  be  recommended,  the 
barometers  above  mentioned,  are  by  some,  divid- 
ed into  two  divisions,  viz:  Barometers  for  de- 
termining Present  Mercantile  Conditions  and 
Barometers  for  determining  Underlying  Mer- 
cantile  Conditions. 

Figures  used  for  determining  present  mercan- 
tile conditions: 
I.     Miles    of    New    Railroad    Constructed.    2. 

Bank  Clearings.     3.     Failures.     4.     Iron 

Industry.     5.     Immigration   Figures.     6. 

Railroad  Earnings. 
Figures  used  in  foretelling  future  mercantile 
conditions : 
I.     Politics.    2.    Money.    3.    Crops.    4.    Stock 

Exchange  Prices.    5.    Foreign  Trade.    6. 

Gold  Movements. 
Most  firms,  instead  of  interpreting  the  figures 
on  each  of  the  twelve  subjects  for  both  present 
and  underlying  conditions,  prefer  each  month  to 
determine  what  the  proper  normal  figure  should 
be  for  each  of  these  subjects  and  note  the  rela- 
tion between  the  actual  figures  for  present  condi- 
tions and  these  normal  figures.  The  normal 
figure  on  any  one  subject  is  obtained  by  plotting 
the  yearly  figures  on  that  subject  for  a  period  of 
ten  or  twenty  years  and  by  drawing  on  that  plot 


^ANGE  OF  COMMODITY  MARKET  71 

a  line  showing  the  average  trend  for  the  entire 
period.  '  This  trend  may  appear  as  an  increase  or 
a  decrease  or  as  a  level  line.  Firms  using  this 
system  obtain  the  normal  figure  for  any  future 
time  by  assuming  that  the  general  direction  of 
this  normal  line  will  continue  the  same.  More- 
over, in  such  a  plot  it  is  often  clearer — in  the 
case  of  some  subjects — to  plot  the  relation  to  a 
ten  year  average  rather  than  actual  figures.  This 
is  especially  true  when  plotting  commodity  prices 
and  other  figures  which  show  a  slight  variation 
or  seasonable  changes. 

In  addition  to  the  value  of  Fundamental  Sta- 
tistics for  determining  the  trend  of  demand,  sup- 
ply, and  prices,  they  are  of  even  more  value  for 
determining  the  amount  of  credit  'which  manufac- 
turers and  merchants  should  at  any  time,  ex- 
tend to  customers;  hut  as  their  use  in  connec- 
tion zvith  "credits"  is  so  zvell  understood,  no  de- 
tailed explanation  is  given  in  this  book. 

Prices  of  Ten  Staple  Commodities : 
Average  Wholesale  Price  From  1860—1907 

i860 
f  Wheat  $1.37  per  bu. ;  corn  $0.73  per  bu. ;  cot- 
ton $0.11  per  lb.;  sugar  $0.0988  per  lb.;  wool 
$0.55  per  lb. ;  iron  $22.70  per  ton ;  copper  $0.2287 
per  lb.;  rubber  $0.55  per  lb.;  pork  $20.00  per 
bbl. ;  coffee  $0.1306  per  lb. 


72  BUSINESS  BAROMETERS 

1861 

Wheat  $1.30  per  bu.;  corn  $0.60  per  bu. ;  cot- 
ton $01301  per  lb.;  sugar  $o.o8M  per  lb.;  wool 
$0.38  per  lb. ;  iron  $20.26  per  ton ;  copper  $0.2225 
per  lb.;  rubber  $0.55  per  lb.;  pork  $21.00  per 
bbl.;  coffee  $0.1275  per  lb. 
1862 

Wheat  $1,28  per  bu.;  corn  $0.59^  per  bu.; 
cotton  $0.3129  per  lb.;  sugar  $0.11^  per  lb.; 
wool  $0.48  per  lb.;  iron  $23.92  per  ton;  copper 
$0.2187  per  lb. ;  rubber  $0.48  per  lb. ;  pork  $12.25 
per  bbl. ;  coffee  $0,205  per  lb. 
1863 

Wheat  $1.16  per  bu. ;  corn  $0.84  per  bu. ;  cot- 
ton $0.6721  per  lb.;  sugar  $0.14^^  per  lb.;  wool 
$0.75  per  lb.;  iron  $35.24  per  ton;  copper 
$0.3387  per  lb.;  rubber  $0.87^  per  lb.;  pork 
$18.50  per  bbl.;  coffee  $0.2965  per  lb. 
1864 

Wheat  $2.01  per  bu. ;  corn  $1.44^^  per  bu. ; 
cotton  $1,015  P^i*  lb.;  sugar  $o.25y|-  per  lb.; 
wool  $1.00  per  lb.;  iron  $59.22  per  ton;  copper 
$0.47  per  lb. ;  rubber  $0.80  per  lb. ;  pork  $44.00 
per  bbl;  coffee  $0.3775  per  lb. 
1865 

Wheat  $2.04  per  bu. ;  corn  $1,26^  per  bu.; 
cotton  $0.8338  per  lb.;   sugar  $o.2i5^  per  lb.; 


.  BUSINESS  BAROMETERS  73 

wool  $0.75  per  lb.;  iron  $46.08  per  ton;  cop- 
per $0.3925  per  lb.;  rubber  $1,20  per  lb.;  pork 
$38.00  per  bbl. ;  coffee  $0.2537^  per  lb. 
1866 

Wheat  $9.20  per  bu. ;  corn  $0.90  per  bu. ; 
cotton  $0432  per  lb.;  sugar  $0.16?^  per  lb.; 
wool  $0.70  per  lb.;  iron  $46.84  per  ton;  cop- 
per $0.3425  per  lb.;  rubber  $1.00  per  lb.;  pork 
$34.00  per  bbl;  coffee  $0.1718  per  lb. 
1867 

Wheat  $3.33  per  bu. ;  corn  $1.21  per  bu. ; 
cotton  $0.3159  per  lb.;  sugar  $0.15?^  per  lb.; 
wool  $0.55  per  lb.;  iron  $44.08  per  ton;  copper 
$0.2537  per  lb.;  rubber  $0.65  per  lb.;  pork 
$24.50  per  bbl.;  coffee  $0.16  per  lb. 
1868 

Wheat  $2.43  per  bu. ;  corn  $1.23  per  bu. ; 
cotton  $0.2485  per  lb.;  sugar  $o.i65^  per  lb.; 
wool  $0.46  per  lb. ;  iron  $39.25  per  ton ;  cop- 
per $0.23  per  lb.;  rubber  $0.67^^  per  lb.;  pork 
$30.00  per  bbl.;  coffee  $0,115  per  lb. 
1869 

Wheat  $1.50  per  bu. ;  corn  $i.02M  per  bu.; 
cotton  $0.2901  per  lb.;  sugar  $o.i6y|  per  lb.; 
wool  $0.48  per  lb.;  iron  $40.61  per  ton;  copper 
$0.2425  per  lb.;  rubber  $0.82  per  lb.;  pork 
$34.00  per  bbl;  coffee  $0.0931  per  lb. 


74  BUSINESS  BAROMETERS 

1870 

Wheat  $1.30  per  bu.;  corn  $1.02  per  bu.; 
cotton  $0.2398  per  lb.;  sugar  $0.13^  per  lb.; 
wool  $0.46  per  lb. ;  iron  $33.23  per  ton ;  copper 
$0.2118  per  lb.;  rubber  $1.00  per  lb.;  pork 
$30.50  per  bbl.;  coffee  $0.10  per  lb. 
1871 

Wheat  $1.60  per  bu. ;  corn  $0.77  per  bu. ; 
cotton  $0.1695  per  lb.;  sugar  $0.13^4  per  lb.; 
wool  $0.62  per  lb.;  iron  $35.08  per  ton;  cop- 
per $0.2412  per  lb.;  rubber  $1.00  per  lb.;  pork 
$23.00  per  lb.;  coffee  $0.1375  per  lb. 
1872 

Wheat  $1.62  per  bu.;  corn  $0.70  per  bu. ; 
cotton  $0.2219  per  lb.;  sugar  $0.12^  per  lb.; 
wool  $0.72  per  lb.;  iron  $48.94  per  ton;  cop- 
per $0.3556  per  lb.;  rubber  $0.72^  per  lb.; 
pork  $16.00  per  bbl.;  coffee  $0.1631  per  lb. 

1873 
Wheat  $1.76   per  bu. ;   corn   $0.63   per   bu. ; 
cotton  $0.2014  per  lb.;  sugar  $0.11^  per  lb.; 
wool  $0.50  per  lb.;  iron  $42.79  per  ton;  cop- 
per $0.28  per  lb.;   rubber  $0.74  per  lb.;  pork 
$18.00  per  bbl.;  coffee  $0.1862  per  lb. 
1874 
Wheat  $1.39   per  bu. ;   corn   $0.86   per  bu. ; 
cotton  0.1795   per  lb.;   sugar  $0.10 1\  per  lb.; 


RANGE  OF  COMMODITY  3IARKET  75 

wool  $0.53  per  lb.;  iron  $30.19  per  ton;  cop- 
per $0.22  per  lb;  rubber  $0.75  per  lb.;  pork 
$24.75  P^r  bbl. ;  coffee  $0.2625  per  lb. 

1875 
Wheat  $1.33   per   bu. ;   corn  $0.84  per  bu.; 
cotton  $0.1546  per  lb.;  sugar  $0.10^*^^  per  lb.; 
wool  $0.52  per  lb. ;  iron  $25.53  per  ton. ;  cop- 
per  $0.2268    per   lb.;   rubber   $0,585^    per   lb.; 
pork  $23.50  per  bbl.;  coffee  $0.1806  per  lb. 
1876 
Wheat  $1-35  per  bu. ;  corn  $0.6254  per  bu.; 
cotton  $0.1298  per  lb.;  sugar  $o.ioH  per  lb.; 
wool  $0.38  per  lb.;  iron  $22.19  P^^  ton;  copper 
$0.21  per  lb.;  rubber  $0.64  per  lb.;  pork  $22.75 
per  bbl.;  coffee  $0,175  per  lb. 
1877 
Wheat  $1.63  per  bu. ;  corn  $0.59^4 »  per  bu. ; 
cotton  $0.1182  per  lb.;  sugar  $0.1  ii\  per  lb.; 
wool  $0.50  per  lb.;  iron  $18.92  per  ton;  cop- 
per $0.19  per  lb.;  rubber  $0.58  per  lb.;  pork 
$17.95  per  bbl. ;  coffee  $0.1943  per  lb. 
1878 
Wheat  $1.24  per  bu. ;  corn  $0.53^^  per  bu.; 
cotton  $0.1122  per  lb.;   sugar  $0.09^^  per  lb.; 
wool  $0.36  per  lb.;  iron  $17.67   per  ton;  cop- 
per $0.1656  per  lb.;  rubber  $0.49  per  lb.;  pork 
$11.35  pei"  bbl.;  coffee  $0.1385  per  lb. 


76  BUSINESS  BAROMETERS 

1879 

Wheat  $1.24  per  bu. ;  corn  $0.47  per  bu. ; 
cotton  $0.1084  per  lb.;  sugar  $o.o85^  per  lb.; 
wool  $0.37  per  lb.;  iron  $21.72  per  ton;  copper 
$0.1862  per  lb.;  rubber  $0.51  )per  lb.;  pork 
^^3-75  per  bbl. ;  coffee  $0.1387  per  lb. 

1880 
Wheat  $1.30  per  bu. ;  corn  $0.55  per  bu. ; 
cotton  $0.1151  per  lb.;  sugar  $o.09|5  per  lb.; 
wool  $0.46  per  lb.;  iron  $28.48  per  ton;  cop- 
per $0.2143  per  lb.;  rubber  $0.81  per  lb.;  pork 
$19.00  per  bbl.;  coffee  $0.15  per  lb. 

1881 
Wheat  $1.30  per  bu. ;  corn  $0.62  per  bu. ; 
cotton  $0.1203  per  lb.;  sugar  $0.09^  per  lb.; 
wool  $0.42  per  lb.;  iron  $25.17  per  ton;  cop- 
per $0.1818  per  lb.;  rubber  $0.76  per  lb.;  pork 
$20.00  per  bbl.;  coffee  $0.1212  per  lb. 

1882 
Wheat  $1.32  per  bu. ;  corn  $0.77  per  bu. ; 
cotton  $0.1156  per  lb.;  sugar  $0.09^  per  lb.; 
wool  $0.42  per  lb.;  iron  $25.77  P^r  ton;  cop- 
per $0.1912  per  lb.;  rubber  $0.87  per  lb.;  pork 
$24.75  per  bbl. ;  coffee  $0.0975  P^r  lb. 

1883 
Wheat   $1.17   per  bu. ;   corn   $0.64   per   bu. ; 
cotton  v$o.ii88  per  lb.;  sugar  $0.08%   per  lb.; 


RANGE  OF  COMMODITY  >IARKET  77 

wool  $0.39  per  lb.;  iron  $22.42  per  ton;  cop- 
per $0,165  per  lb.;  rubber  $1.07  per  lb.;  pork 
$20.15  per  bbl. ;  coffee  $0.0931  per  lb. 
1884 

Wheat  $1.00  per  bu.;  corn  $0.61^  per  bu. ; 
cotton  $0.1098  per  lb.;  sugar  $o.o6M  per  lb.; 
wool  $0.35  per  lb.;  iron  $19.81  per  ton;  cop- 
per $0.13  per  lb.;  rubber  $0.96  per  lb.;  pork 
$19.50  per  bbl.;  coffee  $0.1062  per  lb. 
1885 

Wheat  $0.94  per  bu.;  corn  $0.51  per  bu.; 
cotton  $0.1045  per  lb.;  sugar  $0.06^  per  lb.; 
wool  $0.32  per  lb.;  iron  $17.99  per  ton;  cop- 
per $0.1083  per  lb.;  rubber  $0.56  per  lb.;  pork 
$13.25  per  bbl.;  coffee  $0.09  per  lb. 
1886 

Wheat  $o.88M  per  bu.;  corn  $0.52^  per  bu.; 
cotton  $0.0928  per  lb.;  sugar  $0.0653  per  lb.; 
wool  $0.33  per  lb.;  iron  $20.93  P^r  ton;  cop- 
per $0.1385  per  lb.;  rubber  $0.61  per  lb.;  pork 
$12.20  per  bbl.;  coffee  $0,095  P^^  ^b. 
1887 

Wheat  $0.88  per  bu.;  corn  $0.48^  per  bu.; 
cotton  $0.1021  per  lb.;  sugar  $0.0623  per  lb.; 
wool  $0.34  per  lb.;  iron  $20.93  P^^  ton;  cop- 
per $0.1385  per  lb.;  rubber  $0.76  per  lb.;  pork 
$24.00  per  bbl.;  coffee  $0.1684  per  lb. 


78  BUSINESS  BARO]\IETERS 

1888 

Wheat  $0.94  per  bu.;  corn  $0.5954  per  bu.; 
cotton  $0.1003  per  lb.;  sugar  $0.0602  per  lb.; 
wool  $0.29  per  lb.;  iron  $18.88  per  ton.;  cop- 
per $0.1677  per  lb.;  rubber  $0.76  per  lb.;  pork 
$16.00  per  bbl. ;  coffee  $0.1581  per  lb. 
1889 

Wheat  $0.91  per  bu. ;  corn  $0.43%  per  bu.; 
cotton  $0.1065  per  lb.;  sugar  $0.0718  per  lb.; 
wool  $0.35  per  lb.;  iron  $17,76  per  ton;  cop- 
per $0.1349  per  lb.;  rubber  $0.74  per  lb.;  pork 
13-37^  per  bbl.;  coffee  $0.1765  per  lb. 
1890 

Wheat  $0.92  per  bu. ;  corn  $0.48^  per  bu.; 
cotton  $0-1107  per  lb.;  sugar  $0.0789  per  lb.; 
wool  $0.33  per  lb.;  iron  $18.41  per  ton;  cop- 
per $0,156  per  lb.;  rubber  $0.80  per  lb.;  pork 
$13,625^  per  bbl. ;  coffee  $0.1793  per  lb. 
1891 

Wheat  $1.05  per  bu. ;  corn  $0.67^  per  bu.; 
cotton  $0086  per  lb. ;  sugar  $0.0627  per  lb. ;  wool 
$0.31  per  lb.;  iron  $17.52  per  ton;  copper 
$0.1276  per  lb.;  rubber  $0.78  per  lb.;  pork 
$13.00  per  bbl. ;  coffee  $0.1671  per  lb. 
1892 

Wheat  $0,908  per  bu.;  corn  $0.54  per  bu. ; 
cotton  $0.0771  per  lb.;  sugar  $0.0465  per  lb.; 


RANGE  OF  C03IM0DITY  »t.\RKET  79 

wool  $0.28  per  lb.;  iron  $15,75  per  ton;  cop- 
per $0.1156  per  lb.;  rubber  $0.6763  per  lb.; 
pork  $15.05  per  bbl. ;  coffee  $0.1430  per  lb. 

1893 
Wheat  $0,739  per  bu. ;  corn  $0,499  per  bit.; 
cotton  $0.0856  per  lb.;  sugar  $0.0435  P^r  lb.; 
wool  $0.24  per  lb.;  iron  $14.52  per  ton;  cop- 
per $0.1075  per  lb.;  rubber  $0.7167  per  lb.; 
pork  $21.80  per  bbl;  coffee  $0.1723  per  lb. 

1894 
Wheat  $0,611  per  bu.;  corn  $0,509  per  bu. ; 
cotton  $0.0694  per  lb.;  sugar  $0.0484  per  lb.; 
wool  $0.20  per  lb.;  iron  $12.66  per  ton;  cop- 
per $0.0952  per  lb.;  rubber  $0.6744  per  lb.; 
pork  $14,575^  per  bbl.;  coffee  $0.1654  per  lb. 

1895 

Wheat  $0,669  P^r  bu. ;  corn  $0,477  P^r  bu. ; 
cotton  $00744  per  lb.;  sugar  $0.0412  per  lb.; 
wool  $0.18  per  lb.;  iron  $13.10  per  ton;  cop- 
per $0.1053  per  lb.;  rubber  $0.7425  per  lb.; 
pork  $12,875^  per  bbl.;  coffee  $0.1592  per  lb. 
1896 

Wheat  $0,781  per  bu. ;  corn  $0,340  per  bu. ; 
cotton  $0.0793  pei"  lb.;  sugar  $0.0412  per  lb.; 
wool  $0.17  per  lb.;  iron  $12.95  P^r  ton;  cop- 
per $0.1098  per  lb.;  rubber  $0.80  per  lb.;  pork 
$10.85  per  bbl.;  coffee  $0.1233  per  lb. 


80  BUSINESS  BAR03IETERS 

1897 

Wheat  $0,954  per  bu.;  corn  $0,319  per  bu.; 
cotton  $0.07  per  lb. ;  sugar  $0.0453  P^r  lb. ;  wool 
$0.21  per  lb.;  iron  $21.10  per  ton;  copper 
$0.1136  per  lb.;  rubber  $0.8454  per  lb.;  pork 
$9.00  per  bbl. ;  coffee  $0.0793  per  lb. 
1898 

Wheat  $0,952  per  bu. ;  corn  $0,376  per  bu.; 
cotton  $0.0594  per  lb. ;  sugar  $0,045  P^r  lb. ;  wool 
$0.28  per  lb.;  iron  $11.66  per  ton;  copper 
$0.1205  per  lb.;  rubber  $0.9271  per  lb.;  pork 
$12.30  per  bbl. ;  coffee  $0.0633  P^i"  lb. 
1899 

Wheat  $0,794  per  bu. ;  corn  $0,413  per  bu.; 
cotton  $0.0688  per  lb.;  sugar  $0.0497  P^r  lb.; 
wool  $0.29  per  lb.;  iron  $19.36  per  ton;  copper 
$0.1776  per  lb.;  rubber  $0.9954  per  lb.,  pork 
$10.45  per  bbl. ;  coffee  $0.0604  per  lb. 
1900 

Wheat  $0,804  per  bu.;  corn  $0,453  per  bu.; 
cotton  $0.0925  per  lb.;  sugar  $0.0492  per  lb.; 
wool  $0.28^  per  lb.;  iron  $19.98  per  ton;  cop- 
per $0.1665  per  lb.;  rubber  $0.9817  per  lb.; 
pork  $16.00  per  bbl. ;  coffee  $0.0822  per  lb. 
1901 

Wheat  $0,803  per  bu. ;  corn  $0,567  per  bu.; 
cotton  $0.0875  per  lb.;  sugar  $0.0532  per  lb.; 


RANGE  OP  COMMODITY   MARKET  81 

wool  $0.25  per  lb.;  iron  $15.87  per  ton;  copper 
$0,1672  per  lb.;  rubber  $0.8496  per  lb.;  pork 
$16.80  per  bbl. ;  coffee  $0.0646  per  lb. 
1902 
Wheat  $0,836  per  bu. ;  corn  $0,684  per  bu. ; 
cotton  $0.09  per  lb. ;  sugar  $0.0505  per  lb. ;  wool 
$0.26  per  lb.;  iron  $22.19  per  ton;  copper 
$0.1216  per  lb.;  rubber  $0.7273  per  lb.;  pork 
$18.70  per  ton ;  coffee  $0.0568  per  lb. 

1903. 

Wheat  $0,853  per  bu. ;  corn  $0,372  per  bu. ; 
cotton  $0.1118  per  lb.;  sugar  $0.0446  per  lb.; 
wool  $0.31^  per  lb.;  iron  $19.91  per  ton;  cop- 
per $0.1372  per  lb.;  rubber  $0.9054  per  lb.; 
pork  $18.37  P^r  bbl. ;  coffee  $0.0559  per  lb. 
1904 

Wheat  $1,107  P^r  bu. ;  corn  $0,594  per  bu. ; 
cotton  $0.1175  P^r  lb.;  sugar  $0.0464  per  lb.; 
wool  $0.32/^  per  lb.;  iron  $15.57  P^^  ton;  cop- 
per $0.1301  per  lb.;  rubber  $1.0875  per  lb.; 
pork  $16.58  per  bbl.;  coffee  $0.0782  per  lb. 

1905 
Wheat  $1,028  per  bu. ;  corn  $0,593  P^^  bu. ; 
cotton  $0,098  per  lb.;  sugar  $0.0477  P^^  ^b. ; 
wool  $0.36  per  lb.;  iron  $17.88  per  ton;  cop- 
per $0.1589  per  lb.;  rubber  $1,2425  per  lb.; 
pork  $16.50  per  bbl.;  coffee  $0.0832  per  lb. 


82  BUSINESS  barom:eters 

1906 

Wheat  $0,865  per  bu.;  corn  $0.56  per  bu.; 
cotton  $0,115  per  lb.;  sugar  $0.0526  per  lb.; 
wool  $0.33  per  lb.;  iron  $20.98  per  ton;  cop- 
per $0.1961  per  lb.;  rubber  $1.2131  per  lb.; 
pork  $20.00  per  bbl. ;  coffee  $0.0811  per  lb. 
1907 

Wheat  $0,963  per  bu. ;  corn  $0.64  per  bu. ; 
cotton  $0,121  per  lb.;  sugar  $0.0465  per  lb.; 
wool  $0.34  per  lb. ;  iron  $23.89  per  ton. ;  cop- 
per $0.2125  per  lb.;  rubber  $1.0633  P^^  ^b. ; 
pork  $17.56  per  bbl. ;  coffee  $0.0658  per  lb. 


CHAPTER  IV.. 

I^UNDAMENTAL  STATISTICS   OF   USE   IN   DETERMIN- 
ING WHEN  TO  BUY  AND  SELL. 

S  shown  in  the  first  chapter  of  this 
book,  the  study  of  Comparative 
Statistics  is  of  little  value  for  ascer- 
taining the  best  time  to  buy  or  to 
sell,  and  one  must  resort  to  Fun- 
damental Statistics. 

In  approaching  the  work,  although  other  meth- 
ods may  seem  sufficient  for  a  general  view  of  the 
conditions,  the  need  of  direct  and  definite  results 
leads  the  student  to  seek  a  systematic,  compre- 
hensive, and  uniform  practice,  so  that  a  basis  of 
comparison,  from  period  to  period,  may  be  estab- 
lished at  the  outset.  The  course  usually  followed 
by  the  leading  statisticians  when  studying  Funda- 
mental Statistics  is  to  collect  data,  covering  a 
long  period  of  years,  and  relating  to  the  following 
twenty-five  subjects  under  twelve  headings; 
I\Ioreover,  these  twelve  headings  correspond  al- 
most identically  with  the  twelve  subjects  men- 
tioned in  chapter  III. 

I.    Building  and  Real  Estate 

I.      BUILDING  OPERATIONS   (WiTH  FIRE  LOSSES), 


84  BUSINESS  BAROMETERS 

and  Real  Estate  Operations  as  [Barom- 
eters of  the  country's  property  growth. 

II.  Money  Conditions 

2.  MONEY  IN   CIRCULATION. 

3.  comptroller's  reports   (this  is  the  only 

one  of  the  twenty-five  subjects  for  which 
no  figures  .can  be  obtained  monthly). 

4.  LOANS  O?  THE  NEW  YORK  BANKS. 

5.  CASH   HELD  BY  THE   NEW  YORK  BANKS. 

6.  DEPOSITS  IN  THE  NEW  YORK  BANKS. 

7.  SURPLUS     RESERVES     OE     THE      NEW     YORK 

BANKS. 

III.  Bank  Clearings 

8.  TOTAL    BANK    CLEARINGS    OE    THE    UNITED 

STATES. 

9.  BANK    CLEARINGS    OE   THE    UNITED    STATES, 

EXCLUDING  NEW  YORK. 

IV.  Investment  Market 

ID.  STOCK  EXCHANGE  TRANSACTIONS.  Tables 
on  number  of  shares  traded  in,  the  bond 
sales,  and  the  high  and  low  prices  of  the 
ten  leading  stocks  used  by  the  Babson 
System  as  a  Barometer.  The  latter  ta- 
bles contain  the  high  and  low  prices  for 
each  year  since  1859,  and  the  high  and 
low  for  the  current  year,  revised  each 
month. 

II.  NEW  SECURITIES.  Tables  for  the  new  se- 
curities listed  on  the  New  York  Stock 


FUNDAMENTAL  STATISTICS  85 

Exchange  and  figures  relative  to  other 
issues  publicly  offered  or  authorized,  but 
as  yet  unlisted. 

V.  Business  Failures 

12.  BUSINESS  FAILURES.    Tables  on  number  of 

failures,  amount  of  liabilities,  and  ratios. 

VI.  Labor  Conditions 

13.  LABOR  STATISTICS.     Tables  of  immigration 

figures  and  notes  on  the  general  situ- 
ation. 

VII.  Foreign  Trade 

14.  IMPORTS  OF  MERCHANDISE  INTO  THE  UNITED 
STATES. 

15.  EXPORTS      OF      MERCHANDISE      FROM      THE 

UNITED  STATES. 

16.  r>ALANCK   AND  VOLUME  OF  TRADE. 

VIII.  Gold  Movements 

17.  GOLD  MOVEMENTS  with  tables  on  the  ex- 

ports, the  imports  and  the  balance  of  gold 

movements. 

18.  DOMESTIC  AND  FOREIGN   MONEY  RATES  AND 

FOREIGN  EXCHANGE,  with  tables  on  the 
rates  in  London.  Paris,  and  Berlin. 

IX.  Social  Conditions 

IQ.      POLITICAL   FACTORS. 

X.   Commodity  Prices 

20.  PRODUCTION  OF  GOLD.  Tabks  giving  the 
production  in  the  Rand  Mines  which  best 
show  the  trend  in  the  production  of  the 
entire  world. 


86  BUSINESS  BAROMETERS 

21.  PRICES  OF  COMMODITIES,  including  wheat, 

corn,   cotton,   iron,   copper,   etc. 
XL  Crops  and  Commodity  Statistics 

22.  CROP  CONDITIONS  AND  PRODUCTION  OF  COM- 

MODiTiiiS,  including  pig  iron,  and  copper. 
XII.  Railroad  Earnings 

23.  RAILROAD    GROSS    AND    NET    EARNINGS     (ten 

railroads)  with  annual  figures  for  all 
railroads  relative  to  the  new  mileage 
constructed,  etc. 

24.  IDLE  CAR  FIGURES  for  the  current  ye'ar  and 

the  corresponding  months  of  the  pre- 
ceding two  or  three  years. 

25.  MISCELLANEOUS  STATISTICS.  -f- 

Although  the  system  should  not  be  recom- 
mended, these  figures  are  treated  by  some  firms 
as  follows: 

Each  week  the  figures  published  on  railroad 
earnings,  bank  clearings,  money  rates,  stock  mar- 
ket transactions,  and  other  items,  are  used  for 
ascertaining  present  conditions ;  while  reports  of 
crops,  idle  cars,  gold  movements,  balance  of  trade, 
failures,  etc.,  received  from  time  to  time,  are  the 
foundation  for  estimating  the  underlying  con- 
ditions. These  estimates  for  present  and  under- 
lying conditions  are  expressed  in  numbers  as  two 
barometer  figures.    These  are  used,  as  described 


FUNDAMENTAL  STATISTICS  87 

later,  for  determining  the  "trend"  from  week  to 
week,  and  for  obtaining  the  earliest  possible  in- 
formation as  to  any  change  in  the  mercantile, 
money,   or   investment  market.) 

Figures  on  the  majority  of  these  twenty-five 
subjects  can  be  obtained  not  oftener  than  monthly 
and  therefore  final  totals  need  be  studied  but  once 
each  month.  These  are  inserted  each  month  in 
their  respective  tables,  and  serve  as  a  means  of 
making  an  intelligent  estimate  of  what  will  be  the 
total  figures  for  each  of  the  twenty-five  subjects 
at  the  end  of  the  current  year.-^ 

This  estimate  for  the  year  is  then  compared 
with  the  final  figures  for  the  preceding  years  as 
given  under  the  first  mentioned  table.  If  there 
has  been  a  normal  growth  or  change, — sometimes 
a  favorable  showing  requires  an  increase  or  some- 
times a  decrease, — the  figures  on  a  given  subject 
are  considered  as  signifying  satisfactory  condi- 
tions ;  but  if  a  growth  or  change  is  not  normal,  the 
figures  are  considered  as  showing  unsatisfactory 
conditions.  In  other  words,  satisfactory  condi- 
tions require  a  normal  change,  and  figures  of 
much  less  than  normal,  or  much  more  than  nor- 
mal, are  considered  unsatisfactory.-^ 

The  industrial  organization  of  the  country  is 
similar  to  the  physical  organization  of  the  human 
body.     The  individual  normally  should  have  a 

OF   THE  A 

UNIVERSfTY 


88  BUSINESS  BAROMETERS 

certain  degree  of  appetite  which  he  knows  is  nor- 
mal and  requires  a  normal  amount  of  food.  The 
normal  appetite  increases  from  childhood  to 
youth,  and  from  youth  to  maturity;  but  its  rela- 
tion to  health  is  the  same.  So  long  as  he  regular- 
ly eats  a  normal  amount,  a  man  continues  to 
increase  in  strength  and  vitality;  but  if  he  over- 
eats, or  is  underfed,  he  ceases  to  gain  strength, 
his  efficiency  is  reduced,  and  he  becomes  subject 
to  attacks  of  disease.  As,  therefore,  the  main- 
taining of  good  health  requires  a  certain  normal 
balance,  so  do  the  prosperous  conditions  of  indus- 
trial life.  This  however,  does  not  mean  a  math- 
ematical constant,  as  in  a  rapidly  growing  coun- 
try like  America,  the  figures  to  be  normal  must 
increase  in  proportion  as  the  zvealth,  population 
and  activity  of  the  country  increases.  '  Great  in- 
creases or  great  decreases  are  distinctly  not  nor- 
mal and  are  always  significant  of  a  marked 
change;  a  change  for  the  better,  in  a  time  of 
depression,  when  present  conditions  are  very  un- 
satisfactory;  or  a  change  for  the  worse  during 
a  period  of  prosperity,  when  present  conditions 
are  apparently  very  satisfactory. 

The  figures  on  these  twenty-five  subjects  are 
kept  permanently  bound  in  a  loose  leaf  ledger, 
which  is  usually  divided  into  twenty-five  sections. 
It  often  takes  many  years  to  accumulate  these 


:^i£ift--^ 


FUNDAMENTAli  STATISTICS  89 

figures,  as  they  represent  slow  and  careful  re- 
search. But  they  are  the  foundation  of  all  inves- 
tigations and  it  is  impossible  to  make  practical 
use  of  Fundamental  Statistics  excepting  in  con- 
nection with  these  tables  for  preceding  years  and 
months. 

The  twenty-five  subjects  in  the  list  above  out- 
lined are  arranged  in  the  order  in  which  they  are 
accumulated,  but  for  weekly  and  monthly  analy- 
ses they  are  usually  grouped  differently  and  clas- 
sified under  the  three  following  headings : — 

1.  Tables    used    when    studying    mercantile 

Conditions. 

2.  Tables  used  when  studying  m.onetary  con- 

ditions. 

3.  Tables    used    when    studying    investment 

conditions. 
In  detail  this  classification  is  as  follows: 
{The  Sub-division  into  present  and  under- 
lying conditions  is  not  recommended.  It  is 
preferable  to  interpret  each  set  of-  seven  sub- 
jects simply  as  to  present  and  normal  condi- 
tions. ) 

1.     Figures  Used  When  Studying  Mercan- 
tile Conditions 

(a)     For  determining  present  mercantile  con- 
ditions, 
(i)     Railroad  Earnings. 


90  BUSINESS  BAROMETERS  '^ 

(2)     Bank  clearings, 
(b)     For   determining   underlying  mercantile 
conditions, 
(i)     Crops  and  general  production. 

(2)  Building  reports  and  the  U.  S.  Steel 

"Booked  Order"  account. 

(3)  Idle  cars. 

(4)  Commodity  prices. 

(5)  Labor  conditions. 

2.    Figures  Used  When   Studying   Mone- 
tary Conditions 

(a)  For  determining  present  monetary  con- 

ditions, 
(i)     Monetary  rates  and  supply. 
(2)     Confidence. 

(b)  For    determining    underlying    monetary 

conditions, 
(i)     Surplus  reserve  and  other  items  of 
the   New   York   bank   statement 
and  the  Comptroller's  reports. 

(2)  Balance  of  trade,  imports,  exports, 

and  gold  movements. 

(3)  Foreign  money   rates  and  foreign 

exchange. 

(4)  New  securities  issued  and  new  cor- 

porations organized. 

(5)  Money  in  circulation. 


FUNDAMENTAL  STATISTICS  91 

3.    Figures  Used  When   Studying  Invest- 
ment Conditions 

(a)  For    determining    present    stock-market 

conditions, 
(i)     Average  price  for  leading  railroad 

and  industrial  stocks. 
(2)     Total  stock  exchange  transactions. 

(b)  For  determining  underlying  stock  mar- 

ket conditions, 
(i)     Average  mercantile  and  monetary 
conditions. 

(2)  Political  factors. 

(3)  Great   conflagrations,   earthquakes, 

etc. 

(4)  Failures. 

(5)  Gold  production. 

Investors  and  merchants  who  carefully  study 
these  "figures  will  each  week  obtain  two  barometer 
figures,  one  for  present  conditions  and  also  one 
for  normal  conditions,  for  each  of  the  above 
three  headings.  In  addition,  they  average  these 
three  barometer  figures  for  present  conditions 
and  obtain  a  final  summary  barometer  figure' for 
present  conditions.  They  also  average  the  Three 
barometer  figures  for  norm:*]  c^-^d^tluns  and 
obtain  a  final  summary  barometer  figure  for 
normal  conditions. 


92  BUSINESS  BAROMETERS 

Practically  speaking,  the  barometer  figures  on 
present  conditions  are  mathematically  correct  as 
they  are  obtained  by  comparing  the  actual  figures 
on  earnings,  bank  clearings,  money  rates,  stock 
exchange  prices,  transactions,  etc.,  with  certain 
scales  of  measurement  and  averaging  the  final 
result.  These  figures  on  present  conditions,  there- 
fore, are  not  a  matter  of  opinion  and  any  two 
persons  using  the  same  scale  would  arrive  at 
the  same  conclusion.  In  the  case  of  the  barometer 
figures  for  normal  conditions,  the  method  is 
somewhat  different.  Although  the  basic  figures 
are  derived  by  the  use  of  a  fixed  scale,  the  result 
is  often  modified  in  accordance  with  other  data 
at  hand,  and  according  to  the  opinions  of  the  in- 
vestor or  merchant  making  the  deductions. 

To  arrive  at  a  conclusion,  the  summary  bar- 
ometer figures,  obtained  each  week,  are  compared 
with  the  results  of  previous  weeks  of  other  years. 
If,  for  instance,  the  final  barometer  figures  for  a 
long  period  of  weeks,  show  a  continuous  but  slow 
increase,  the  country  is  surely  facing  improved 
coiiijitions,  however  poor  business  may  appear  to 
the  c^erage  merchant.  On  the  other  hand  if, 
during  a  period  of  great  prosperity,  the  barometer 
figures  show  a  gradual  decrease,  a  reverse  in 
business  conditions  is  certain.    This  principle  ap- 


FUNDA3IENTAL  STATISTICS  93 

plies  to  the  barometer  figures  both  for  present 
conditions  and  for  normal  conditions. 

If  the  barometer  figure  for  normal  condi- 
tions is  much  less  than  that  for  present  condi- 
tions, the  indication  is  that  there  is  liable  to  be  a 
change  for  the  worse  at  any  time ;  but  if  the  figure 
for  normal  conditions  is  considerably  more 
than  that  for  present  conditions,  a  change  for  the 
better  may  be  looked  for  at  any  time.  Moreover, 
the  greater  the  difference  between  the  respective 
barometer  figures  for  present  conditions  and 
normal  conditions,  the  sooner  the  change  may  be 
expected.  When  the  figures  are  approximately 
the  same,  the  conditions  will  probably  remain  as 
they  are  and  are  known  as  "irregular."  The  best 
conditions  are  usually  signified  by  plus  loo  or 
over,  and  the.  most  unsatisfactory,  by  minus  lOO 
or  less. 

In  addition  to  the  above,  business  men  watch 
for  the  monthly  figures  on  each  of  the  twenty-five 
or  more  subjects  above  mentioned,  and  as  these 
figures  are  received  each  month,  they  have  a 
clerk  post  them  in  the  proper  columns  in  the  "led- 
ger." This  results  in  giving  the  firm  a  ledger 
similar  to  those  which  contain  the  accounts  of 
their  customers.  The  difference  is  simply  that 
this  ledger  contains  the  accounts  known  as  "Fail- 
ures," "Bank  Clearings,"  etc.,  instead  of  accounts 


94  BUSINESS  BAROMETERS 

of  certain  debtors  such  as  "John  Smith"  and 
"Henry  Jones." 

This  method,  as  we  have  described  it,  may  seem 
compHcated  at  first  thought,  and  the  mass  of  data 
required  too  great  to  be  handled  easily ;  but  such 
is  not  the  case.  Although  there  are  a  large  num- 
ber of  figures  to  study,  yet  the  points  to  be  re- 
membered are  very  simple;  viz:  In  determining 
present  conditions,  watch  railroad  earnings  and 
bank  clearings  for  mercantile  affairs ;  money  rates 
and  confidence  for  monetary  affairs;  and  "Stock 
Market"  prices  and  transactions  for  investment 
affairs;  keeping  clearly  in  mind  that  while  cer- 
tain subjects,  require  an  increase  for  normal  con- 
ditions, others  should  show  a  decrease,  and  that 
abnormal  figures  in  either  direction  are  unsatis- 
factory. 

Firms  desiring  to  figure  underlying  conditions^ 
watch  crop  estimates,  construction  and  build- 
ing statistics,  idle  cars,  reports,  etc.  for  mercan- 
tile  affairs ;  the  New  York  statement,  the  balance 
of  trade,  gold  movements  and  foreign  money 
rates  for  monetary  conditions;  and  when  deter- 
mining investment  conditions,  watch  all  of  the 
above  and  especially  consider  political  factors  and 
important  international  events.  Although  theor- 
etically it  is  proper  to  consider  "underlying"  con- 
ditions, yet  practically  it  is  not  advisable. 


FUNDAMENTAL  STATISTICS  95 

Too  much  emphasis  cannot  be  laid  upon  the 
danger  of  confusing  different  analyses,  as  often  a 
figure  which  shows  improved  present  conditions 
is  significant  of  unsatisfactory  future  con- 
ditions. For  instance,  when  money  rates  gradual- 
ly increase  and  surplus  reserves  gradually  de- 
crease after  a  period  of  depression,  the  combin- 
ation is  significant  of  improved  present  conditions. 
Also  when  commercial  paper  is  discounted  at 
3^%  ,  one  may  always  be  sure  that  the  country 
is  not  prosperous;  but  that  many  factories  are 
idle  and  many  men  out  of  work.  As  the  mills  re- 
sume operations  and  as  business  becomes  more 
active,  money  rates  increase  and  surplus  reserves 
decrease.  This  is  all  shown  by  higher  barometer 
figures  for  present  monetary  conditions. 

On  the  other  hand,  as  money  rates  increase 
and  the  surplus  reserves  decrease,  the  change  is 
significant  of  unsatisfactory  future  conditions. 
In  other  words,  when  money  rates  are  below 
normal  it  show^s  business  is  dull,  but  will  be 
better;  and  when  money  rates  are  above  normal, 
it  shows  that  business  is  good,  but  may  soon 
be  worse. 

Of  course  if  this  data  were  obtained  by  each  in- 
vestor, merchant  or  banking  house  independently, 
it  would  require  a  force  of  clerks  to  collect,  ana- 
lyze and  sort  the  mass  of  figures ;  but  as  the  data 


96  BUSINESS  BAROMETERS 

may  now  be  obtained  from  a  central  agency,  all 
of  the  drudgery  is  eliminated.  The  investor  or 
merchant  may  simply  note  the  new  barometer 
figures  as  they  are  made  up  each  week  and  insert 
in  the  permanent  ledger  the  final  monthly  figures 
as  they  are  received  each  month. 

So  long  as  the  barometer  figures  show  no 
decided  change,  the  merchant  or  investor  may 
give  no  attention  to  the  monthly  figures  other 
than  to  see  that  they  are  entered  in  the  ledger. 
On  the  other  hand,  if  at  any  time  a  comparison 
of  the  barometer  figures  shows  that  a  distinct 
change  in  business  conditions  is  imminent,  the 
merchant  may  refer  to  the  yearly  and 
monthly  tables  as  appearing  in  his  ledger  and  de- 
termine for  himself  the  exact  nature  and  amount 
of  the  change.  By  referring  to  the  monthly  fig- 
ures published  for  the  current  year,  he  may 
readily  compare  them  with  the  figures  for  the 
same  months  of  the  past  few  years  and  form  an 
estimate  of  what  the  total  annual  figures  for  the 
current  year  will  be.  After  making  this  estimate 
for  the  total  current  year,  it  may  be  readily  com- 
pared with  the  final  annual  figures  for  preceding 
years,  which  comparison  will  clearly  indicate  the 
trend  of  business  conditions. 

In  addition  to  carefully  studying  all  subjects 
independently  and  separately,  he  is  very  careful 


FUNDAMENTAL  STATISTICS  97 

to  consider  each  subject  under  its  proper  heading. 
That  is,  when  studying  present  conditions  he  first 
gives  his  entire  attention  to  present  mercantile 
conditions,  studying  simply  subjects  relating 
thereto;  secondly,  gives  his  attention  to  present 
monetary  conditions,  studying  only  subjects  re- 
lating thereto;  and  thirdly  gives  his  attention  to 
investment  conditions,  with  the  same  care.  After 
referring  to  the  tables  in  this  way  and  deducing 
three  separate  conclusions,  he  takes  an  average 
of  these  conclusions,  thus  forming  his  final  sum- 
mary on  present  conditions.  In  the  same  way, 
when  studying  normal  conditions,  he  first 
studies  the  subjects  in  forecasting  mercantile  af- 
fairs and  forms  his  conclusions  therefrom ;  sec- 
ondly, the  subjects  used  for  monetary  affairs ;  and 
thirdly,  the  subjects  connected  with  investment 
affairs.  To  make  independently  a  satisfactory 
examination  in  this  way  requires  only  a  few 
hours.  Usually  the  investor  or  merchant  is  satis- 
fied to  depend  upon  the  barometer  figures  fur- 
nished by  the  central  agency,  and  does  not  make 
a  personal  examination  more  than  once  or  twice 
a  year,  excepting  in  times  of  panic.  This  is  es- 
pecially true  if  the  weekly  barometer  figures  are 
supplemented  by  charts — revised  monthly — for 
each  of  the  twelve  main  subjects  or  headings 
previously  mentioned.     With  these  charts  show- 


98  BUSINESS  BAROMETERS 

ing  the  relation  between  the  actual  and  the  nor- 
mal, all  thoughts  of  "underlying"  conditions  may 
be  ignored,  thus  greatly  simplifying  the  work. 

But  whenever  the  time  or  money  expended, 
the  merchant,  investor,  or  banker  never  regrets 
these  investigations,  as  they,  give  him  a  clear  idea, 
not  only  of  present  conditions  but  also  of  the 
normal  conditions  and  consequently  of  what 
he  may  expect  in  the  future.  If,  during  a  period 
of  depression,  uncertainty,  and  discouragement, 
the  barometer  figures  and  the  charts  show  dis- 
tinctly^that  the  country  is  about  to  enter  a  period 
of  prosperity,  investors  buy  stocks,  merchants 
buy  goods,  and  the  banker  extends  loans.  The 
result  is  that  when  prosperity  returns  the  inves- 
tors and  merchants  find  that  they  have  purchased 
very  much  below  the  prevailing  prices  and  are 
liable  to  obtain  many  times  the  profit  that  they 
otherwise  would. 

During  a  period  of  great  prosperity  and  extrav- 
agance, when  everybody  is  buying  goods  or  secur- 
ities and  there  is  a  general  increase  of  indebted- 
ness, if  these  barometer  figures  and  charts  show 
a  change  for  the  worse,  the  investors  sell  their 
securities  for  cash,  the  merchants  reduce  their 
stock  and  outstanding  credits,  and  the  bankers 
reduce  loans  or  place  a  large  part  of  them  "on 
call."     These  statistics  therefore,  not  only  serve 


FUNDAMENTAL  STATISTICS  99 

as  an  insurance  against  loss,  but  enable  these  men 
to  be  prepared  to  take  advantage  of  the  very  low 
prices  which  are  sure  to  recur  in  the  course  of 
a  year  or  two. 

The  Chart  System  is  possible,  as  the  figures  for 
underlying  conditions  bear  a  constant  ratio  to  the 
difference  between  the  figures  for  present  condi- 
tions and  normal  conditions.  By  obtaining  prop- 
er figures  under  each  of  the  twelve  headings  for 
normal  conditions  and  comparing  therewith  the 
figures  for  present  conditions  the  result  is  self 
evident.  The  reason  for  this  may  appear  clearer 
by  remembering  that  all  underlying  conditions 
may  be  classified  as  "unsatisfactory,"  "normal  or 
satisfactory/'  or  "ultra  conservative." 

Unsatisfactory  underlying  conditions  exist 
when  the  figures  are  dangerously  abnormal  or 
when  the  pendulum  has  swung  too  far  towards 
the  dangerous  side  and  must,  by  force  of  gravity, 
soon  fall.  Very  satisfactory  or  ultra  conservative 
underlying  conditions  exist  when  the  figures  are 
abnormally  conservative  or  when  the  pendulum 
has  swung  too  far  on  the  conservative  side  and 
must,  by  force  of  gravity,  soon  fall.  Satisfactory 
or  normal  conditions  exist  when  the  figures  are 
normal  and  the  pendulum  is  swinging  not  too  far 
in  either  direction  from  the  center. 


CHAPTER  V. 

EVENTS  AND  CONDITIONS  SINCE  i860  WITH  EACH  YEAR 

TREATED  INDEPENDENTLY 

i860 

|ONDITIONS  were  very  unsatisfac- 
tory; Lincoln  was  elected  in  Nov- 
ember and  the  Southern  States  im- 
mediately thereafter  gave  notice  of 
their  secession.  This  caused  a  financial  crisis,  and, 
for  the  first  timein  the  history  of  the  country,  clear- 
ing house  certificates  were  issued.  The  failures 
for  the  year  were  3676;  pig  iron,  of  which  821,- 
22'^  tons  were  produced,  sold  at  an  average 
price  of  $22.70  per  ton;  1837  additional  miles 
of  railroad  were  constructed;  150,237  immi- 
grants entered  the  country;  the  clearings 
amounted  to  over  $7,230,000,000  while  exports 
and  imports  together  amounted  to  over  $687,- 
000,000.  These  apparently  normal  figures,  how- 
ever, were  due  to  presumably  satisfactory  con- 
ditions during  the  first  eight  or  nine  months  of 
the  year.  The  "drop"  came  at  the  time  of  the 
election  and  of  high  money  rates  in  November. 
1861 
Conditions  at  the  beginning  of  the  year  were 
very  unsatisfactory  and  continued  so  during  the 


EVENTS  SINCE  186«  101 

first  six  months.  There  were  6,993  faiUires; 
the  production  of  pig  iron  decreased  to  653,164 
tons  and  the  price  decreased  to  $20.26  per  ton. 
Only  660  miles  of  new  road  were  constructed 
and  less  than  90,000  immigrants  came  to  the 
country;  the  clearings  fell  off  to  less  than 
$6,000,000,  and  the  foreign  trade  to  about  $500,- 
000,000.  But  the  people  soon  recovered  cour- 
age, and  the  last  portion  of  the  year  saw  a  change 
for  the  better.  In  March,  the  Morrill 
tariff  law  was  passed,  which  gave  a  special  im- 
petus to  mercantile  and  manufacturing  business, 
and  by  the  close  of  the  year  a  period  of  improved 
conditions  was  well  under  way  with  easier  mon- 
ey rates. 

1862 
This  year  the  failures  fell  to  1652;  the 
pig  iron  produced  amounted  to  over  700,000  tons 
and  the  price  to  about  $24  per  ton.  There  were 
834  new  miles  of  railroad  constructed  and  the 
immigration  was  practically  the  same  as  the 
preceding  year;  the  clearings  increased  to  over 
$6,870,000,000,  but  the  volume  of  foreign  trade 
decreased  to  about  $380,000,000,  thus  showing 
that  the  period  of  improvement  had  gained 
strength. 


102  BUSINESS  BAROMETERS 

1863 

The  failures  declined  to  495  and  the  iron  pro- 
duction increased  to  846,000  tons  with  an  in- 
crease in  price  to  over  $35  a  ton.  There  were 
1050  additional  miles  of  railroad  constructed, 
immigration  increased  to  over  174,000,  and  the 
clearings  increased  to  nearly  $15,000,000,000. 
Moreover,  foreign  trade  increased  to  over  $447,- 
000,000. 

This  year  the  first  horse  car  line  was  con- 
structed in  New  York  City,  and  the  Erie  railroad 
began  to  pay  dividends.  Moreover,  Congress 
aided  the  movement  toward  prosperity  by  pass- 
ing certain  laws  for  the  inflation  of  the  cur- 
disastrous  to  the  country,  temporarily  hastened 
the  period  of  prosperity. 
1864 

This  period  of  prosperity  was  at  its  full  height 
at  the  beginning  of  1864.  The  failures  had  in- 
creased slightly  numbering  520;  the  iron  pro- 
duction amounted  to  over  1,000,000  tons  with 
a  phenomenal  high  price  of  $59  per  ton.  Only 
738  miles  of  new  road  were  constructed,  but 
nearly  200,000  immigrants  entered  the  country. 
The  bank  clearings  increased  to  over  $24,000,- 
000,000,  nearly  double  the  total  for  the  previous 
year  and  four  times  the  amount  for  1862.  For- 
eign trade  increased  to  over  $475,000,000,  but 
money  rates  were  high. 


EVENTS  SINCE   1860  103 

This  year  in  connection  with  the  stock  of 
the  Harlem  River  R.  R.,  a  corner  took  place 
which,  together  with  the  figures  above  men- 
tioned, showed  clearly  that  conditions  were 
unsatisfactory  and  that  a  change  for  the 
worse  might  be  expected  at  any  time.  The  men 
who  saw  this  change  sold  their  stocks  either  late 
in  1864  or  at  the  beginning  of  the  next  year. 
1865 

The  failures  again  increased  to  530  and  the 
pig  iron  production  decreased  sharply  to  about 
830,000  tons,  while  the  price  fell  to  $46  a 
ton.  1 1 77  miles  of  new  road  were  constructed 
and  over  247,000  immigrants  arrived.  The  bank 
clearings  showed  very  little  increase,  amounting 
to  only  $26,000,000,000;  and  foreign  trade  fell 
off  to  about  $400,000,000.  Money  rates  were 
still  high. 

Had  it  not  been  for  Lee's  surrender,  these 
figures  would  have  been  much  more  unsatisfac- 
tory, but  the  fact  that  the  war  had  closed,  caused 
sufficient  rejoicing  to  counteract  many  other 
evils.  The  shooting  of  Lincoln,  however,  again 
upset  matters  and  owing  to  the  unsatisfactory 
conditions  of  the  two  previous  years,  stocks 
which  sold  at  a  high  average  price  of 
$158  in  the  early  part  of  the  year  fell  to  an 
average  of  $125  before  the  year  ended. 


104  BUSINESS  BAROMETERS 

1866 
This  decline  of  stocks  was  continued  in 
1866,  when  the  average  fell  to  $99,  a  de- 
cline which  was  anticipated  by  those  who  had 
been  watching  the  trend  of  figures  closely.  This 
year  the  first  official  crop  reports  were  published 
by  the  national  government. 

Corn  and  wheat  produced  this  year  amounted 
to  over  1,000,000,000  bushels.  The  failures  in- 
creased 300%  numbering  over  1500,  showing 
that  the  severe  period  of  decline,  which  had  be- 
gun the  previous  year,  had  become  well-devel- 
oped. In  fact  this  was  generally  considered  a 
year  of  distinct  depression  and  gloom.  Nbt- 
withstanidng  the  very  great  number  of  failures, 
iron  production  increased  to  over  1,200,000  tons 
and  the  selling  price  averaged  $46  per  ton.  17 16 
miles  of  new  railroad  were  constructed,  the 
clearings  showed  a  slight  increase  amounting 
to  over  $28,000,000,000  foreign  trade  increased 
to  over  $780,000,000,  thus  showing  that  under- 
lying conditions  had  begun  to  improve,  even 
although  surface  conditions  and  the  stock  mar- 
ket showed  no  improvement.  After  the  war 
closed,  banking  conditions  became  more  settled 
and  money  became  easier. 


■^ 


EVENTS  SINCE   1860  |05 

1867 

Although  this  year  the  two  major  crops  were 
slightly  less,  declining  to  980,761,400  bushels, 
and  failures  had  increased  to  2780,  yet  there  was 
also  a  slight  increase  in  the  iron  production. 
This  production  showed  an  increase  of  100,000 
tons,  with  only  a  small  decrease  in  the  price 
per  ton.  Moreover,  2249  miles  of  new  railroad 
were  constructed  and  the  bank  clearings  held 
their  own  with  the  value  of  foreign  trade  only 
slightly  lower.  Stocks  were  still  very  low,  the 
average  being  98  compared  with  a  high  point 
of  over  158  two  years  earlier.  Surface  condi- 
tions were  still  very  bad,  yet  it  was  plainly  to 
be  seen  that  they  were  rapidly  becoming  more 
normal  and  that  a  rise  in  stocks  was  imminent, 
especially  as  money  rates  had  declined. 
1868. 

The  expected  advance  came  the  follow- 
ing year,  when  the  average  price  increased 
from  98  in  1867  to  147  in  1868.  The  crops  of 
corn  and  wheat  were  over  1,130,000,000  bushels; 
the  failures  decreased  from  1-33%  to  .94%  com- 
pared with  the  number  of  firms  in  business ;  the 
iron  production  increased  to  over  1,400,000  tons; 
2979  miles  of  railroad  were  constructed;  bank 
clearings  again  showed  no  decline,  but  held  their 
own  and  there  was  but  a  slight  reduction  in 
foreign  trade. 


106  BUSINESS  BAROMETERS 

The  increase  in  the  price  of  stocks,  how- 
ever, was  more  or  less  artificial,  as  this  was 
the  year  of  the  great  contest  between  the  Erie 
Railroad,  represented  by  Drew  and  Fiske,  and 
the  New  York  Central,  represented  by  Commo- 
dore Vanderbilt,  the  former  winning  by  having 
the  Erie  put  out  a  convertible  bond  issue  and 
then  immediately  converting  the  bonds  into  cash. 
Owing  to  this  and  other  unfortunate  incidents, 
the  student  saw  clearly  that,  although  business 
was  improving,  the  underlying  conditions  in  the 
stock  market  were  unsatisfactory;  that  is,  the 
great  rise  was  not  wholly  founded  on  improved 
underlying  conditions.  Moreover,  the  money 
situation  was  not  truly  satisfactory. 

1869 

That  ,this  analysis  of  the  situation  was 
decidedly  correct  was  proved  by  the  history  of 
1869,  for  this  year  witnessed  the  famous  "Black 
Friday"  panic  when  the  gold  exchange  suspend- 
ed and  many  large  stock  exchange  firms  failed. 
This  is  one  of  the  incidents  where  special  events 
upset  the  general  trend  of  conditions.  Had  it 
not  been  for  the  unfortunate  operations  of  cer- 
tain speculators,  the  period  of  prosperity  which 
was  just  beginning,  would  have  had  a  much 
longer  duration.     Crops  of  1869  exceeded  those 


EVENTS  SINCE   1860  107 

of  any  previous  year;  the  failures  decreased  to 
.79% ;  iron  production  increased  to  i  ,700,000  tons 
at  a  price  of  over  $40  a  ton.  Over  4615  miles 
of  new  railroad  were  constructed  and  over 
350,000  immigrants  came  to  the  country.  The 
bank  clearings  showed  a  phenomenal  increase, 
amounting  to  over  $37,000,000,000,  and  the  for- 
eign trade  exceeded  $700,000,000.  As  was  the 
case,  however,  with  the  Harlem  corner  in  1864, 
the  "Black  Friday"  panic  of  this  year  seemed 
to  create  a  wound  that  would  not  heal,  so  thit 
although  business  continued  to  increase  and  sur- 
face conditions  appeared  to  be  more  favorable, 
underlying  conditions  grew  more  and  more  un- 
satisfactory every  day  and  money  rates  continued 
high.  The  leading  bankers  and  merchants  who 
were  studying  these  underlying  conditions  and 
watching  the  relation  between  actual  and  normal 
figures,  disposed  of  their  securities  and  reduced 
their  merchandise. 

1870 
Had  it  not  been  for  the  fine  crops  of  1870 — 
which  showed  figures  largely  in  excess  of  any 
previous  year — there  would  have  been  a  more 
rapid  decline  in  business  conditions.  As  it  was, 
however,  the  failures  increased  to  .83%,  iron 
production   dropped  to    1,565,179  tons   and  the 


108  BUSINESS  BAROMETERS 

price  to  $33.23  a  ton,  the  lowest  for  eight  years. 
However,  6,078  miles  of  new  railroad  were  con- 
structed; immigrants  continued  to  arrive  in 
great  numbers,  the  total  being  387,ocx),  while 
foreign  trade  reached  a  volume  of  $828,000,000. 
Bank  clearings,  on  the  other  hand,  showed  a 
considerable  falling  off,  although  the  year  as  a 
whole  was  looked  upon  by  business  men  as  pros- 
perous. Many  of  those  who  were  not  acquaint- 
ed with  the  true  condition  of  affairs  increased 
their  stocks  of  goods  and  extended  their  loans. 
As  the  stock  market  was  steady,  in- 
siders acquainted  with  the  conditions  had  no 
trouble  in  disposing  of  the  small  number  of 
shares  which  they  had  not  sold  during  the  pre- 
ceding year.  This  also  may  have  been  due  to  the 
fact  that  money  was  much  easier  during  this 
year. 

1871 
The  crops  this  year  amounted  to  only  1,220,- 
000,000  bushels;  the  failures  to  2915  and  iron 
production  to  1,700,000  tons  at  a  price  of  $35 
per  ton.  There  were  7379  miles  of  new  railroad 
constructed  and  foreign  trade  increased  to  over 
$963,000,000.  There  was  a  falling  off,  however, 
in  immigration  and  the  increase  in  bank  clear- 
ings was  only  normal.     This  too  was  the  year 


EVENTS  SINCE  1860  109 

of  the  great  Chicago  fire  which  caused  money 
rates  to  again  increase,brought  to  an  abrupt  end 
the  period  of  prosperity  and  inaugurated  a  slow 
but  gradual  period  of  decline  in  business. 
1872 
This  year  the  country  had  better  crops  which 
amounted  to  i  ,342,cxx),ooo  bushels  or  about  the 
same  as  in  1870.  The  failures,  however,  in- 
creased to  .'j']^  and  iron  production  took  a 
jump  to  2,500,000  tons  with  an  increase  in  price 
to  $49  a  ton.  This  great  increase  of  iron  pro- 
duction was  probably  due  to  the  perfection  of 
commercial  methods  of  making  Bessemer  and 
open  hearth  steel,  greatly  increasing  the  demand 
for  all  grades  of  pig-iron,  but  especially  the 
lower  grades.  Construction,  which  is  always 
clearly  indicated  by  the  number  of  additional 
miles  of  railroad  reported — which  this  year 
amounted  to  only  5878 — was  very  much  less 
than  usual.  Immigration,  however,  increased  to 
over  400,000  new  arrivals  and  t  he  bank 
clearings  to  over  $33,000,000,000.  Foreign  trade 
show^ed  a  small  increase  and  money  rates  were 
again  erratic. 

1873 
Still  conditions  would  probably  have  improved 
this  year  had  it  not  been  for  the  big  Boston  fire. 


no  BUSIXESS  BAROMETERS 

which  occurred  November  ii,  1872,  and  caused 
money  rates  to  still  further  advance  and  which 
was  the  last  straw  to  break  the  camel's  back. 
The  Pacific  Railroads,  opened  in  the  year  1869, 
were  largely  owned  in  New  England  and  the 
promoters  of  both  State  Street  and  Wall  Street 
had  been  borrowing  money  heavily  of  the  in- 
surance companies.  These  loans  the  insurance 
companies  were  now  obliged  to  call.  Moreover, 
the  preceding  year  was  the  culmination  of  the 
Erie  tragedy  when  James  Fiske  was  shot  and 
Erie  stocks  were  struck  from  the  New  York 
Stock  Exchange.  Money  had  been  very  high 
in  1872  and  men  of  affairs  clearly  saw  at  the 
beginning  of  1873,  that  it  would  be  impossible 
to  continue  business  under  existing  conditions 
and  that  a  house  cleaning  would  be  necessary. 
Consequently,  when  crop  reports  continued  to 
point  to  small  harvests,  which  later  turned  out 
to  be  about  100,000,000  bushels  less  than  the 
preceding  year,  and  when  the  number  of  fail- 
ures showed  a  distinct  increase,  things  were 
allowed  to  seek  their  own  level.  That  is,  the  large 
bankers  and  merchants  withdrew  their  support 
and  business  began  to  decrease  immediately.  The 
production  of  iron  kept  up  to  the  figures  of  the 
preceding  year,  but  the  price  dropped  to  $42  a 


EVENTS  SINCE   1860  III 

ton.  Moreover,  railroad  construction  decreased 
to  about  4,000  miles,  although  the  figures  for 
immigration,  bank  clearings  and  foreign  trade, 
still  held  firm. 

Conditions  at  this  time  are  interesting  to  study 
as  they  show  clearly  the  three  steps  in  the  pro- 
gress of  a  decline  and  the  precipitation  of  a  cri- 
sis: first,  the  large  bankers  and  merchants  sell 
their  securities  and  reduce  their  merchandise, 
while  the  public  is  very  optimistic;  second,  after 
some  special  event  has  taken  place,  in  this  case 
the  Boston  fire,  which  convinces  these  bankers 
and  great  merchants  that  the  time  has  come 
for  a  house  cleaning, — they  withdraw  their  sup- 
port, although  the  people  are  still  bullish  and 
the  ordinary  store-keeper  is  borrowing  money  to 
buy  goods;  and  third  comes  the  panic  itself, — 
which  in  the  case  of  the  great  panic  of  1873 
caused  the  failure  of  J.  Cook  &  Co.  and  many 
other  firms.  This  panic  made  imperative  the  clos- 
ing of  the  New  York  Stock  Exchange  from  Sep- 
tember 18  to  the  30th.  This  third  step  is  the  be- 
ginning of  the  decline  in  the  eyes  of  the  ordinary 
merchant,  manufacturer  and  laborer.  And  in  real- 
ity, until  this  third  phase  comes,there  is  no  decline 
in  surface  conditions,  although  underlying  condi- 
tions have  been  unsatisfactory  for  a  year  or  more, 


112  BUSINESS  BAROMETERS 

during  which  time  bankers  and  merchants  who 
study  underlying  conditions,  had  been  preparing 
for  the  depression. 

1874 
This  was  another  year  of  poor  crops,  the  total 
production  of  iron  and  wheat  decreasing  to 
1,158,000,000  bushels.  Failures  increased  to 
.97% ;  iron  production  fell  off  and  the  price  de- 
creased from  $42  to  $30  a  ton.  Railroad  construc- 
tion decreased  to  only  21 17  miles;  immigration 
fell  off  to  nearly  150,000  and  bank  clearings  fell 
from  $35,000,000,000  in  1873  to  $22,000,000,000 
in  1874,  accompanied  with  a  decrease  in  foreign 
trade.  Thus  the  period  of  decline  was  changing 
to  a  period  of  depression,  augmented  by  grang- 
er laws  which  were  being  passed  by  the  railroads 
and  the  usual  unsatisfactory  money  conditions. 

1875 
This  was  a  year  of  good  crops  of  wheat  and 
corn,  together  amounting  to  over  1,613,000,000 
bushels.  Mercantile  failures,  however,  showed 
a  great  increase,  viz:  to  1.21%;  iron  production 
dropped  to  2,000,000  tons  and  the  price  to  $25 
a  ton:  Moreover,  only  171 1  miles  of  railroad 
were  constructed,  the  smallest  number  for  ten 
years,  and  immigrants  decreased  nearly  another 
hundred   thousand.     Railroad   earnings   showed 


w 


EVENTS  SINCE  1860  113 

a  tremendous  falling  off,  and  both  the  Erie  and 
the  Wabash  defaulted  interest  on  their  bonds. 
Money  continued  high  and  confidence  was  great- 
ly upset.  Bank  clearings,  on  the  other  hand, 
showed  a  slight  increase  and  foreign  trade  a 
slight  decrease,  thus  showing  that  the  period  of 
depression  had  set  in.  The  business  depression, 
however,  relieved  the  money  market  and  rates 
gradually  decreased. 

1876 
Commercial  failures  increased  to  1.33%  of  the 
firms  in  business;  iron  production  decreased  to 
1,868,000  tons  and  the  price  to  $22  a  ton.  New 
mileage  increased  somewhat,  but  immigration 
fell  off  further  to  169,000;  bank  clearings  to 
about  $21,000,000,000  and  the  foreign  trade 
to  $1,000,000,000.  These  figures,  it  will  be  seen, 
reached  the  most  unsatisfactory  point  for  sev- 
eral years  and  a  study  shows  that  they  were 
considerably  below  normal  and  that  the  liquida- 
tion had  been  very  thorough.  Money  had  be- 
come easier  and  stocks  were  very  low  owing  to 
a  general  rate-war  between  the  trunk  lines.  In 
fact,  the  Pacific  of  Missouri  was  foreclosed  this 
year  and  the  public  became  very  much  discour- 
aged. All  who  had  been  connected  with  stocks 
had  lost   their   money,   prominent  bankers   and 


114  BUSINESS  BAROMETERS 

merchants  had  failed,  railroads  were  carrying 
traffic  at  a  loss,  mills  and  factories  were  idle,  and 
the  ordinary  business  man  was  thoroughly  dis- 
couraged. Money  rates  however,  were  less  than 
at  any  time  since  i860. 

These  facts  showed  that  the  pendulum  had 
swung  too  far  the  other  way,  but  knowing  that 
business  conditions  are  like  the  pendulum  which 
after  wide  swings  in  either  direction,  tends  to 
resume  a  normal  position  in  response  to  the  laws 
of  gravity,  investors  and  merchants  who  were 
studying  the  conditions  and  comparing  figures 
saw  clearly  that  this  was  the  year  in  which  to 
buy  stocks,  make  plans  for  further  extensions, 
and  prepare  for  the  period  of  improved  condi- 
tions which  was  bound  to  come.  In  fact,  the 
stocks  which  these  investors  sold  at  an  average 
of  $160  a  share  in  1869  many  now  purchased, 
at  an  average  of  $62  a  share,  while  others  who 
waited  until  the  beginning  of  the  following  year 
purchased  at  an  average  price  of  $42. 

1877 
As  is  usual,  the  business  of  a  merchant,  man- 
ufacturer and  store-keeper  continues  poor  a  year 
after  conditions  really  begin  to  improve  and  the 
stock  market  begins  to  advance.  Therefore, 
although  students  of  the  situation  saw  a  change 


EVENTS  SINCE   1860  115 

for  the  better  the  preceding  year,  it  was  not 
until  this  year  that  any  change  was  apparent  in 
mercantile  conditions,  and  then  it  was  but  slight. 
This  year  brought  good  crops  which  amounted 
to  over  1,700,000,000  bushels;  failures,  for  the 
reasons  given  above,  increased  compared  with 
the  number  of  firms  in  business,  to  1.36%;  iron 
production  increased  to  over  2,000  tons  (al 
though  the  price  dropped  further  to  $18.92  per 
ton) ;  immigration  figures  continued  to  decline, 
but  the  rate  of  decline  gradually  diminished. 
Bank  clearings,  however  showed  a  slight  in- 
crease to  $23,000,000,000,  foreign  trade  to 
$1,050,000,000  and  money  rates  continued  low. 
The  country  was  in  extreme  depression  at 
the  beginning  of  the  year,  yet  with  the  good 
crops,  railroad  earnings  and  confidence  im- 
proved. Moreover,  money  rates  gradually  de- 
creased so  that  Christmas  1877,  was  a,  time  of 
thanksgiving  for  many  who  had  escaped  being 
crushed  during  the  preceding  five  years. 

1878 

This  year  crops  still  further  increased  by  an- 
other 100,000,000  bushels.  Failures  also  in- 
creased in  number,  showing  that  the  eflfect  of 
the  depression  on  smaller  firms  was  not  yet 
over,  and  also  that  the  statistics  of  failures  are 


116  BUSINESS  BAROMETERS 

about  the  last  to  show  an  improvement.  Yet 
iron  production  was  increased  to  a  total  of  2,301,- 
215  tons,  while  the  price  declined  only  about 
$1  a  ton;  railroad  construction  showed  no  fur- 
ther decline,  but  advanced  to  2665  miles  and 
there  was  but  a  slight  decline  in  immigration. 
Bank  clearings  practically  held  their  own  and 
foreign  trade  showed  a  distinct  increase.  As 
such  an  increase  prevented  gold  exportations 
and  further  strengthened  the  money  conditions 
at  home,  the  year  was  considered  by  all  as  one 
of  distinct  improvement. 

1879 

Again,  the  country  was  blessed  with  good 
crops  which  amounted  to  nearly  2«B,ooo,ooo,ooo 
bushels,  and  failures  decreased  phenomenally  to 
less  than  1%,  the  lowest  for  five  years.  More- 
over, iron  production  increased  to  over  2,700,- 
000  tons  and  the  price  to  over  $21  per  ton.  Rail- 
road construction  nearly  doubled,  amounting  to 
4809  miles  and  immigration  showed  a  distinct 
increase  for  the  first  time  for  six  years;  bank 
clearings  increased  to  over  $25,000,000,000  and 
foreign   trade   to  $1,156,000,000. 

In  fact  the  entire  year  witnessed  an  improve- 
ment so  marked  that  at  the  end  of  the  twelve 
months,  mills  were  in   full  operation,  all  labor 


EVENTS  SINCE   1860  117 

employed,    and    the    entire    country  in  a  very 
prosperous  condition.    Money  rates  strengthened 
somewhat,  but  not  severely. 
1880. 

This  year  marked  the  beginning  of  another 
period  of  distinct  prosperity.  The  crops  amount- 
ed to  over  2,215,000,000  bushels.  The  failures 
decreased  to  .63%, — with  one  exception  the  low- 
est point  on  record, — iron  production  increased 
about  50%  to  3,800,000  tons  with  an  increase  in 
price  to  $28  a  ton.  The  new  mileage  constructed 
amounted  to  67 11  miles  and  immigration  in- 
creased from  177,000  in  1879  to  257,000  in  1880. 
The  most  noticeable  change  in  all  the  statistics 
was  in  bank  clearings,  which  increased  to 
$37,000,000,000  and  foreign  trade  to  $1,500,000,- 
000. 

Stocks  were  very  active,  money  normal,  con- 
fidence reigned  throughout  the  country,  con- 
solidations were  in  progress,  new  industries  were 
started,  new  railroads  were  projected  and  every- 
one was  elated  over  the  fact  that  the  country 
was  once  more  prosperous.  Moreover,  Garfield 
the  candidate  for  the  Republican  party,  always 
representative  of  business  interests,  was  elected 
President  in  November.  Money  was  constantly 
in  more  demand  and  the  rates  were  gradually 
increasing. 


118  BUSINESS  BAROMETERS 

1881 
Although  the  general  public  considered  this 
year  one  of  great  prosperity,  there  were  certain 
events  which  caused  the  barometers  for  underly- 
ing conditions  to  begin  to  decline,  and  before 
the  year  1881  closed,  the  underlying  conditions 
were  very  unsatisfactory.  The  crop  outlook 
was  poor  and  the  year  ended  with  a  crop  failure, 
the  wheat  and  corn  production  decreasing  to 
about  1,578,000,000  bushels.  The  percentage  of 
failures  began  to  increase,  and  although  the 
price  of  iron  decreased,  the  production  increased 
above  the  normal.  Moreover,  9846  miles  of  rail- 
road were  constructed,  and  amount  four  times 
greater  than  that  four  years  before ;  immigration 
began  to  increase  in  new  proportions  and  bank 
clearings  increased  to  the  abnormally  large  sum 
of  $48,000,000,000.  Foreign  trade  showed  no 
appreciable  increase. 

Money  conditions  were  not  satisfactory, 
tremendous  stock  issues  were  being  float- 
ed, and  large  stock  dividends  were  being  de- 
clared. To  the  outsider  ever)rthing  appeared  to 
be  very  prosperous,  yet  the  careful  student  saw 
plainly,  that  true  conditions  were  not  what  they 
should  be   and   needed   only   some   sudden   dis- 


EVENTS  SINCE   1860  119 

turbing  event,  to  bring  about  disaster, — 
such  an  event  as  the  Harlem  corner  in  1864  and 
the  Boston  fire  in  1873. 

This  sudden  event  turned  out  to  be  the  shoot- 
ing of  President  Garfield  on  July  2,  1881,  after 
which  event,  the  bankers  and  merchants  who 
kept  careful  watch  of  conditions  decided 
to  sell.  Therefore,  in  1881  they  sold, 
at  an  average  of  $137  a  share,  securities  which 
some  of  them  had  purchased  at  an  average  of 
$62  in  1876  and  others  at  an  average  of  $48  a 
share  in  1877. 

1882 

Fortunately  however  for  those  who  had 
not  already  liquidated,  this  year  was  another 
year  of  splendid  crops,  the  country  producing 
over  2,121,000,000  bushels  of  wheat  and  corn. 
Failures  increased  and  iron  production  expand- 
ed .far  above  a  healthy  amount,  while  railroad 
new  construction  reached  the  high  figure  of 
11,599  rniles,  the  greatest  new  mileage  fpr  any 
year  in  the  history  of  the  country.  A  very  large 
number  of  immigrants  arrived,  788,000,  and 
bank  clearings  continued  to  hold  up  to  $46,000,- 
000,000  which  was  far  in  excess  of  normal  con- 
ditions. 


120  BUSINESS  BAROMETERS 

Therefore,  although  students  of  the  business 
conditions  clearly  understood  during  the  pre- 
ceding year  that  trouble  would  soon  come,  the 
public  apparently  was  absolutely  unaware  of  it 
and  as  in  1870,  continued  to  buy  goods,  increase 
their  loans,  and  to  extend  their  credit.  In  fact 
the  average  merchant  and  speculator  seemed  per- 
versely to  do  everything  possible  to  make  the 
break  greater  when  the  large  bankers  and  mer- 
chants should  withdraw  support  for,  although 
the  decline  had  set  in,  it  was  not  perceived  by 
the  general  public.  As  mentioned  in  the  ac- 
count of  the  year  1873,  there  are  three  steps  in 
every  decline ;  and  the  second,  that  in  which  the 
leaders  withdraw  their  support,  had  not  come, 
for  this  was  the  year  in  which  Jay  Gould  made 
his  famous  exhibit  of  securities.  As  will  be 
seen  by  referring  to  the  newspapers  of  that  day, 
it  was  clearly  understood  by  men  of  affairs  that 
a  distinct  decline  had  begun  and  Gould  probably 
knew  this  as  well,  if  not  better,  than  any  other 
man.  Therefore,  although  he  was  preaching 
that  true  conditions  were  perfectly  sound  and 
that  still  greater  prosperity  was  ahead,  he  him- 
self was  doubtless  unloading  and  liquidating 
with  all  possible  speed  in  preparation  for  the 
withdrawal  of  his  support  later  on.     Moreover, 


EVENTS  SINCE   1860  121 

the  banks  were  aiding  their  directors  by  keeping 
down  money  rates  aUhough  the  demand  for  mon- 
ey was  very  great. 

1883 

The  crops  for  this  year  were  not  up  to  the 
preceding  year,  amounting  to  only  1,972,000,000 
bushels.  Moreover  failures  continued  to  in- 
crease, reaching  a  percentage  of  1.06%;  iron  pro- 
duction fell  off  and  the  price  dropped  to  $22.42 
a  ton;  railroad  construction  declined  about  40%, 
and  bank  clearings  fell  off  to  $40,000,000,000 
for  New  York  City.  Heretofore  these  were  the 
only  clearings  available.  Beginning  this  year, 
clearings  were  published  for  the  entire  country 
and  now  amounted  to  $51,699,823,752.  As  thi^ 
new  figure  is  more  valuable  for  forecasting  con- 
ditions, it  will  be  the  one  to  which  we  shall  re- 
fer henceforth.  Fortunately  for  the  country  and 
for  those  who  had  not  liquidated,  foreign  trade 
still  remained  strong,  the  volume  for  the  year 
being  $1,500,000,000. 

The  stock  market  also  held  up  remarkably 
well  although  high  prices  were  maintained  only 
through  manipulation  and  in  order  to  allow  the 
insiders  the  opportunity  to  liquidate.  In  other 
words,  although  stocks  continually  declined,  be- 
ginning in  1 88 1,  when  they  had  reached  a  high 


122  BUSINESS  BAROMETERS 

point  of  $137,  they  reached  another  high  point 
of  $134  in  1882  and  $121  in  1883.  All  who 
were  thoroughly  acquainted  with  the  situation 
knew  that  these  prices  were  kept  up  simply  to 
allow  the  insiders  to  liquidate  and  that  as  soon 
as  they  had  liquidated  and  withdrawn  their  sup- 
port, the  decline  would  be  much  more  rapid.  In 
the  same  way  money  rates  were  not  allowed  to 
seek  their  true  high  level- 

1884 
When  this  support  was  actually  withdrawn 
in  1884,  money  rates  immediately  advanced  and 
the  prices  of  stocks  immediately  dropped  to  the 
proper  level  under  such  unsatisfactory  conditions, 
— that  is  to  about  $80  a  share.  This  drop  was 
simultaneous  with  the  great  Ward  and  Grant 
failure  on  May  6,  1884,  together  with  the  fail- 
ure of  Henry  Villard  and  James  R.  Keene  of 
the  same  year.  Now  the  bankers  had  sold  their 
securities,  loans  were  immediately  called,  rates 
marked  up,  and  everything  possible)  done  to 
make  other  people  liquidate.  Receivers  were 
appointed  for  many  of  the  railroads  and  the 
third  step  mentioned  in  our  description  of  the 
year  1873  was  now  completed.  Crop  conditions 
were  somewhat  against  these  insiders,  as  this 
was  another  year  of  fine  crops,  corn  and  wheat 


EVENTS  SINCE  1866  123 

amounting  to  over  2,300,000,000  bushels;  but 
the  failures  increased  again  to  1.21%,  iron  pro- 
duction fell  off  to  about  4,000,000  tons  and  the 
price  to  less  than  $20  per  ton.  New  mileage 
amounting  to  over  11,000  miles  in  1882,  de- 
creased to  less  than  4,000  miles  in  1884.  Not 
only  was  this  cessation  in  construction  necessary 
owing  to  the  stringency  in  the  money  market, 
but  it  was  one  of  the  means  used  by  the  large 
bankers  for  withdrawing  their  support.  Immi- 
gration showed  a  large  decrease  and  clearings 
dropped  to  $44,165,126,355,  accompanied  by  a 
decline  of  about  $150,000,000,  in  foreign  trade. 

If  it  had  not  been  for  the  good  crop"  reports 
during  this  year,  probably  stocks  would  have 
declined  very  much  further,  but  under  the  cir- 
cumstances they  dropped  only  to  an  average 
of  $80.  In  fact,  the  election  of  Grover  Cleveland 
in  November  did  not  seem  to  break  the  market 
very  severely  and  many  bankers  and  investors 
decided  that  this  was  a  time  to  again  purchase, 
being  able  to  obtain  at  an  average  of  $80  a  share 
what  they  sold  at  an  average  of  $137  in  188 1. 
As  it  happened,  however,  the  following  year 
was  still  to  be  one  of  depression  and  those  who 
did  not  purchase  in  1884  still  had  an  opportun- 
ity to  obtain  these  stocks  below  $90  during  the 
following  year,  1885. 


124  BUSINESS  BAROMETERS 

i88s 

This  was  a  year  of  distinct  depression,  with 
the  customary  accompaniments;  cheap  money 
and  general  activity.  The  crops  were  fairly 
good,  wheat  and  corn  amounting  to  2,293,000,- 
000  bushels.  Failures  showed  a  percentage  of 
1.16%  and  only  about  4,000,000  tons  of  iron 
were  produced  at  a  price  of  $17.99  a  ton.  Only 
3131  miles  of  new  railroad  were  constructed 
this  year  and  the  immigration  amounted  to  less 
than  400,000  persons.  The  total  bank  clearings 
amounted  to  only  about  $47,439,303,599  and  the 
foreign  trade  to  $1,320,000,000.  The  falling  off 
in  both  immigration  and  bank  clearings  was 
tremendous  and  these,  together  with  figures  for 
new  railroad  construction  show  conclusively  the 
state  of  trade  during  this  year.  Moreover,  there 
were  no  prospects  of  improved  conditions,  ex- 
cept that  the  liquidation  had  been  thorough.  The 
ten  stocks  already  mentioned  in  this  book,  which 
sold  at  an  average  of  $80  in  1884,  sold  at  an 
average  of  $83  at  one  time  during  this  year, 
1885.  As  in  previous  instances,  therefore,  there 
was  a  set-back  in  prices  after  the  first  advance, 
showing  fthat  investors  have  about  one  year 
in  which  to  purchase  securities.  Although  pur- 
chases should  be  made  before  there  is  an  im- 


EVENTS  SINCE   1860  125 

provement  in  surface  conditions,  they  need  not 
be  purchased  at  the  time  of  the  first  break,  and 
no  great  haste  is  necessary. 
1886. 
The  crops  this  year  showed  a  slight  falling 
off,  but  this  was  due  more  to  a  smaller  acreage 
than  to  smaller  crops.  The  percentage  of  fail- 
ures was  reduced  to  1.01%  and  the  iron  pro- 
duction increased  to  5,683,000  tons  with  an  in- 
crease in  price  to  $18.71.  Immigration  still  further 
decreased  to  334,000,  but  the  new  mileage  con- 
structed amounted  to  8128  miles  and  the  clear- 
ings increased  to  $49,247,681,400  while  the  vol- 
ume of  trade  practically  held  its  own.  These 
figures  show  that  a  period  oJ  improvement  had 
commenced,  and  although  many  small  merchants 
were  only  beginning  to  feel  the  effects  of  the 
great  depression,  true  conditions  were  distinctly 
more  than  normal  and  the  pendulum  was  swing- 
ing too  far  the  other  way.  In  view  of  this, 
stocks  began  to  rally  and  plans  for  extensions 
and  large  undertakings  were  again  discussed. 
Moreover,  the  defeat  of  the  various  bills,  which 
were  introduced  into  Congress  for  the  reduc- 
tion of  the  tariff  caused  a  special  increase  of 
confidence  among  manufacturers,  wholesalers 
and  bankers.  Money  rates  also  remained  nor- 
mal which  greatly  encouraged  new  enterprises. 


126  BUSINESS  BAROMETERS 

1887 

Although  the  total  crops  for  this  year  were 
slightly  below  that  of  previous  years,  other  fac- 
tors were  distinctly  favorable,  and  in  the  early 
part  of  the  year  there  was  a  great  advance  in 
the  stock  market, — an  advance  altogether  too 
great  for  a  year  preceding  a  presidential  elec- 
tion. As  above  stated,  however,  underlying  con- 
ditions rapidly  improved;  failures  decreased  to 
.90% ;  iron  production  increased  to  over  6,400,- 
000  and  the  price  to  over  $20  a  ton.  The  num- 
ber of  miles  of  railroad  constructed  increased 
to  12,983  miles ;  immigration  showed  an  increase 
of  about  150,000  which  was  the  greatest  for  a 
number  of  years.  Clearings  again  showed  an 
increase  to  a  total  of  nearly  $51,091,236,324  and 
foreign  trade  increased  to  over  $1,400,000,000. 
As  the  two  preceding  years  were  years  of  im- 
provement, this  year  ushered  in  the  year  of 
prosperity,  during  which,  had  it  not  been  for  the 
fact  of  the  presidential  election  coming  the  fol- 
lowing year,  stock  market  prices  would  have 
doubtless  greatly  increased.  This  is  especially 
true  since  money  rates  continued  fairly  low 
throughout  the  year. 

Owing  to  the  fact  that  a  presidential  election 
is  usually  accompanied  by  a  decrease  in  trade, 


EVENTS  SINCE   1860  127 

as  shown  by  lower  figures  for  bank  clearings, 
etc.,  stock  market  operators  believed  that  there 
must  be  of  necessity,  a  distinct  drop  before  the 
election.  Consequently  they  turned  to  the  "bear" 
side  for  a  few  months.  The  result  of  this  move- 
ment was  that  if  one  had  sold  during  the  early 
part  of  1887  he  could  have  again  purchased  the 
same  securities  for  about  25  points  less  in  1888. 
It  is  important  to  notice  at  this  point  that 
although  prosperity  may  begin  just  preceding 
an  election,  if  so,  it  always  suflfers  a  temporary 
set-back  before  reaching  its  zenith.  When  the 
election  comes  after  two  or  three  years  of  pros- 
perity, it  is  generally  a  sign  of  a  period  of  de- 
cline. 

1888 
As  true  conditions  were  on  the  conservative 
side  of  nonnal,  and  as  the  period  of  prosperity 
had  not  been  of  long  duration,  having  only  just 
begun,  this  shock  was  bound  to  be  only  tempor- 
ary, especially  as  in  this  year  of  1888  the  crop 
outlook  was  good,  wheat  and  corn,  amounting 
to  2,400,000,000  bushels.  Being  a  presidential 
year,  the  failures  increased  1%  and  there  was 
no  marked  increase  in  the  iron  production, — in 
fact,  the  price  fell  off  about  $2  a  ton.  Only 
7028  miles  of  railroad  was  constructed  and  the 
bank  clearings  declined  to  about  $49,484,584,175. 


128  BUSINESS  BAROMETERS 

Immigration,  however,  again  increased  to  over 
546,000,  the  vohime  of  trade  to  $1,419,000,000, 
while  money  rates  continued  fairly  normal. 

As  the  Democrats  were  defeated  and  General 
Harrison,  of  the  Republican  party  elected,  there 
was  immediate  improvement  in  all  business 
conditions,  including  a  rebound  in  stock  market 
prices  to  the  former  high  level  of  over  a  year 
before. 

1889 
This  was  another  year  of  prosperity,  with  the 
greatest  crops  in  the  history  of  the  nation,  up 
to  this  time,  amounting  to  over  2,500,000,000 
bushels  in  corn  and  wheat.  The  year  showed 
no  appreciable  increase  in  failures,  iron  pro- 
duction increased  to  7,600,000  tons  with  but 
a  slight  decHne  in  price.  The  decrease  for  new 
railroad  mileage  constructed  fell  to  5,695  miles, 
but  as  the  country  was  now  well  served  with 
railroad  mileage,  average  figures  meant  even 
more  than  very  high  figures  a  few  years  previous 
to  this.  The  decrease  in  immigration  was 
largely  due,  to  this  decrease  in  railroad  mileage, 
bank  clearings  increased  to  over  $56, 110, 250,- 
455  and  the  foreign  trade  increased  to  $1,487,- 
000.000. 


EVENTS  SINCE   1860  129 

1890 

This  was  a  year  of  crop  failures  and  the 
last  year  of  the  period  of  prosperity.  The  coun- 
try was  in  a  very  prosperous  condition  and  as 
the  average  man  did  not  realize  or  even  suspect 
a  change  in  conditions  until  about  a  year  after 
fundamental  conditions  began  to  show  a  decline, 
there  was  no  increase  in  failures,  but  rather  a 
decline.  The  iron  mills  had  not  yet  caught  up 
with  their  orders  so  that  this  year  witnessed  the 
greatest  iron  production  in  the  history  of  the 
country,  amounting  to  9,202,000  tons.  The 
price,  moreover,  increased  to  $18.41  with  the 
same  number  of  new  miles  of  railroad  construct- 
ed as  the  previous  year,  which,  under  existing 
conditions,  was  very  great.  Immigration  showed 
further  increase,  bank  clearings  jumped  to  over 
$60,546,563,997,  and  the  foreign  trade  to  over 
$1,647,000,000.  Both  of  these  latter  figures  were 
the  largest  in  the  history  of  the  country.  Mon- 
ey rates,  however,  were  increasing  and  the  sup- 
ply of  new  funds  rapidly  diminishing. 

In  addition,  this  year  saw  the  effects  of  "Mor- 
gan's Gentlemen's  Agreement"  adopted  by  the 
large  railroad  systems.  Bankers,  however, 
were  now  watching  for  the  proverbial  "unex- 
pected event,"  and  this  came  in  the  Baring  failure. 


130  BUSINESS  BAROMETERS 

This  failure,  although  of  an  English  firm,  seri- 
ously affected  the  stock  market  of  America  and 
students  of  underlying  conditions  recognized  it 
as  the  death-knell  of  the  period  of  prosperity, 
having  the  same  effect  as  the  "Harlem  Corner" 
in  1866,  the  great  fires  of  1872,  and  the  shoot- 
ing of  President  Garfield  in  188 1.  By  saying 
that,  in  the  eyes  of  the  great  bankers  and  mer- 
chants, it  brought  this  period  of  prosperity  to 
an  end,  we  do  not  refer  to  the  immediate  drop 
in  prices  caused  directly  by  the  Baring  failure, 
as  the  prices  rebounded  immediately  afterward. 
But  we  refer  to  the  decline  which  started  eigh- 
teen months  later,  in  the  early  part  of  1892. 
However,  the  wise  investors  and  merchants  did 
not  wait  for  1892  before  preparing  to  liquidate. 
In  fact,  many  had  already  liquidated  before  the 
Baring  failure,  when  the  average  price  of  stocks 
stood  at  over  $140,  knowing  that  such  extremely 
prosperous  conditions  as  existed  in  the  early 
part  of  this  year,  could  not  possibly  last. 

1891 

Although  the  McKinley  tariff,  passed  in  the 
fall  of  1890,  temporarily  relieved  the  tension, 
yet  the  money  situation  was  very  unsatisfactory. 

Although  bankers  and  merchants  acquainted 
with   true  conditions  were   liquidating  with  all 


EVENTS  SINCE  1860  131 

possible  speed,  the  average  manufacturer  and 
store-keeper  had  not  the  slightest  idea  of  any 
change  in  conditions.  This  was  especially  true, 
owing  to  the  abundant  crops  of  this  year  1891, 
which  amounted  to  over  2,670,000,000  bushels, 
the  largest  crops  in  the  history  of  the  country 
up  to  this  time  and  not  again  to  be  exceeded, 
excepting  slightly  in  1896,  until  1902,  a  period 
of  ten  years.  These  fine  crops  caused  the  news- 
papers to  be  especially  bullish,  and,  as  there  was 
no  appreciable  increase  in  failures  and  but  a 
small  decrease  both  in  iron  production  and  in 
the  number  of  miles  of  new  railroad  construc- 
tion, this  was  a  prosperous  year  for  the  country 
as  a  whole.  Immigration  again  increased  by 
110,000  arrivals  and  foreign  trade  to  1,729,000,- 
000,  although  bank  clearings  fell  off  slightly. 
These  factors  enabled  the  bankers  and  merchants 
to  keep  down  money  rates  from  further  advanc- 
ing and  to  bolster  up  the  market  in  order  to  un- 
load their  securities  and  merchandise.  Conse- 
quently, although  true  conditions  were  very  far 
from  normal  and  the  pendulum  was  far  over 
to  the  dangerous  side,  yet,  as  may  be  seen 
from  the  periodicals  and  daily  papers  of  that 
year,  the  people  thought  1891  a  very  satisfac- 
tory year  and  that  prosperity  was  bound  to  con- 
tinue for  many  years  to  come. 


132  BUSINESS  BAROMETERS 

1892 
With  the  beginning  of  1892,  syndicates  and 
stock  operators  who  had  not  already  liquidated, 
made  one  great  and  final  effort  to  put  up  the 
market,  and  succeeded.  Those  who  did  not 
liquidate  in  1890  when  the  average  for  our  ten 
stocks  stood  at  $141,  or  in  the  preceding  year 
when  they  could  have  also  sold  at  the  same  price, 
now  sold  on  the  receipt  of  the  first  private  crop 
returns.  As  detected  early  by  such  men,  this 
was  a  year  of  poor  crops,  the  total  yield  of 
wheat  and  corn  declining  to  about  2,140,000,000 
bushels.  However,  failures  still  showed  the  very 
low  percentage  of  .88%  and  pig  iron  production 
again  increased  to  9,157,000  tons.  The  price, 
on  the  other  hand,  decreased  to  $15.75  a  ton. 
New  railroad  construction  held  its  own  at  4*584 
miles;  immigration  again  increased  to  623,000; 
bank  clearings  to  over  $61,919,126,622,  and  the 
volume  of  trade  to  over  $1,850,000,000.  These 
more  satisfactory  figures  were  printed  and  dis- 
tributed broadcast  by  the  press  as  an  apparent 
demonstration  that  the  period  of  prosperity  was 
certain  to  continue  several  years  longer, 
although  prosperity  had  already  lasted  too  long. 
Moreover,  this  was  also  an  election  year  and 
the  banking  situation  was   very  unsatisfactory, 


EVENTS  SINCE  1860  133 

although  money  rates  were  temporarily  de- 
pressed. Therefore,  students  of  the  situation 
saw  clearly  that  the  period  of  decline  was  well 
under  way,  although  this  was  not  realized  by  the 
average  investor  and  business  man  until  the 
following  year.  In  the  fall  of  1893  Ex-Presi- 
dent Clevelland  was  re-elected  and,  although 
prices  were  held  up  a  few  months  longer  by 
sheer  manipulation,  the  end  was  plainly  in  sight. 

1893 

This  feeling  became  generally  evident  early 
in  1893  when  the  crop  reports  began  to  be  pub- 
lished, and  they  were  none  too  pessimistic,  as  the 
final  total  crop  of  wheat  and  corn  amounted  to 
only  about  2,000,000,000  bushels.  Failures  in- 
creased sharply  to  128%  and  pig  iron  production 
fell  off  about  2,000,000  tons  with  a  decrease  in 
price  of  over  $1  a  ton.  Only  2789  miles  of  rail- 
road were  constructed  and  immigration  fell  off 
to  502,000.  Bank  clearings  fell  off  to  $53,143,- 
527,108  and  foreign  trade  to  $1,714,000,000. 
This  year  the  change  in  conditions  became  appar- 
ent to  all  classes,  as  mills  began  to  run  on  half 
time,  collections  became  poor,  and  general  condi- 
tions unsatisfactory.  In  fact,  support  of  all  kinds 
had  been  withdrawn,  every  commodity,  including 
money,  was  allowed  to  seek  its  own  level,  and 


134  BUSINESS  BAROMETERS 

every  merchant  to  take  care  of  himself  as  best 
he  could.  This  therefore  was  a  year  when  se- 
curities might  have  been  repurchased.  In  fact, 
those  persons  who  had  sold  in  1890  at  $141  now 
repurchased  at  $98  as  they  had  waited  three 
years.  Those  who  sold  out  during  the  preced- 
ing year  at  $142  had  several  opportunities  dur- 
ing the  coming  few  years  to  purchase  these  se- 
curities at  almost  as  low  figures,  as  they  dropped 
to  $105  in  1894,  $103  in  1895  and  $100  in  1896. 

1894 
This  year  in  reality  witnessed  the  greatest 
crop  failure  in  the  history  of  the  country.  The 
crops  had  fallen  below  1,600,000,000  busheils 
during  the  70s,  yet  a  very  much  smaller  area 
was  then  under  cultivation  and  conditions  were 
entirely  different.  As  figures  clearly  show,  a 
small  increase  or  decrease  in  crops  does  not 
affect  business  excepting  sentimentally,  but  a 
great  failure  such  as  was  witnessed  in  1894 
gave  the  country  a  shock  from  which  it  took 
years  to  recover.  The  business  failures  of  this 
year  showed  no  decrease  over  the  preceding 
year,  but  the  output  of  iron  fell  to  6,657,000 
tons  with  a  very  low  average  price  of  $12.66 
a  ton  which  was  less  than  the  cost  of  production. 
The   new    railroad   mileage   decreased   to    over 


EVENTS  SINCE   1860  135 

2157  miles  and  immigration  showed  the  great- 
est falling  off  in  percentage  in  the  history  of 
the  country.  This  same  statement  is  true  of 
bank  clearings  which  fell  off  from  $54,143,527,- 
108  in  1893  to  $45,460,058,609  in  1894.  There 
was  also  a  decrease  in  foreign  trade.  There- 
fore, this  year  was  one  of  distinct  depression, 
and  for  a  long  period  to  come,  the  country  was 
to  suffer  from  the  effect  of  the  calamity.  In 
addition  to  the  crop  failures,  the  Pullman  strike 
occurred,  and  the  Wilson  bill  affecting  the  tar- 
iff was  also  passed ;  in  fact,  1894  was  apparently 
the  worst  year  since  the  Civil  War.  Neverthe- 
less, the  banking  situation  was  greatly  improved 
and  money  rates  again  declined. 
1895 

This  year  was  one  of  great  gloom.  The  effect 
of  the  preceding  two  years, — during  which  so 
many  bankers  and  merchants  failed,  and  one- 
third  of  the  total  railroad  mileage  of  the  United 
States  fell  into  the  hands  of  receivers, — began  to 
have  its  effects  upon  all  labor  and  even  upon  the 
most  humble  store-keeper.  Mills  were  shut  down ; 
great  poverty  existed  in  the  cities  and  distress 
was  felt  everywhere.  At  the  beginning  of  this 
year  there  was  no  sign  of  improvement.  As 
soon  as  the  crop  estimates  were  published,  how- 


136  BUSINESS  BAROMETERS 

ever,  it  was  seen  that  they  were  very  favorable, 
and  when  the  harvest  was  computed  at  the  end 
of  the  year  a  grand  total  of  2,6i8,ooo,cxx)  bush- 
els was  recorded.  As  the  crop  reports  improved, 
they  exerted  a  good  influence  upon  general  con- 
ditions. Failures  decreased  to  1.09%  and  iron 
production  increased  nearly  3,ooo,cxx)  tons  with 
an  increase  in  price.  New  mileage,  however, 
decreased  to  1938  miles,  immigration  to  280,000 
persons,  while  foreign  trade  also  fell  off, 
although  bank  clearings  showed  an  increase- 

Conditions  doubtless  would  have  taken  a  turn 
for  the  better  had  it  not  been  for  the  very 
unfortunate  conditions  of  the  finances  and 
the  great  exportation  of  gold.  Although 
President  Cleveland  did  everything  within  his 
power  to  uphold  the  gold  standard  and  the  credit 
of  the  United  States,  the  drain  was  too  heavy, 
especially  after  his  famous  Venezuela  message. 
The  possibility  of  war  with  our  greatest  foreign 
creditor,  viz:  England,  naturally  caused  great 
excitement  and  prevented  any  improvement 
which  otherwise  would  have  been  due  at  this 
time. 

1896 
Notwithstanding  the  unfortunate  exportation 
of  gold   and    the   Venezuela  message    of    the 


EVENTS  SINCE   1860  137 

preceding  year,  which  temporarilly  caused  high 
money  rates  in  1896,  Providence  was  gracious 
to  the  country  and  gave  abundant  crops,  which 
exceeded  those  of  the  preceding  year.  FaiUires 
showed  an  increase  and  iron  production  a  de- 
crease, both  in  tonnage  and  in  price,  yet  there 
was  a  slight  increase  in  the  number  of  miles  of 
new  railroad  constructed  and  a  distinct  increase 
in  immigration.  New  York  bank  clearings,  and 
foreign  trade.  Therefore,  although  there  were 
no  signs  of  better  times  in  surface  conditions, 
underlying  conditions  became  much  sounder. 
Had  it  not  been  for  the  alarm  felt  at  the  Demo- 
cratic nomination  of  Bryan  in  June,  this  would 
have  been  from  its  very  beginning,  a  year  of  dis- 
tinct improvement.  When  the  election  of  McKin- 
ley  in  the  fall  of  1896  removed  this  cause  of  dis- 
trust, bankers  and  merchants  who  were  studying 
the  situation  became  convinced  that  a  change  for 
the  better  was  imminent. 
1897 
Although  the  crops  this  year  did  not  amount 
to  the  tremendous  harvests  of  the  two  preceding 
years,  they  exceeded  2,430,000,000  bushels,  which 
was  very  satisfactory.  Moreover,  the  failures 
decreased  to  1.26%  and  iron  production  in 
creased  to  over  9,650,000  tons.  New  mileage 
again  increased  to  2,188  miles,  bank  clearings 


138  BUSINESS  BAR03IETERS 

to  over  $57,229,070,956  and  foreign  trade  to 
over  $1,800,000,000.  There  was  a  still  further 
decline  in  immigration  this  year,  but  other  points 
were  favorable  and  underlying  conditions  were 
becoming  more  and  more  satisfactory  every 
month.  As  we  have  already  suggested,  however, 
the  effect  upon  the  country  of  so  many  shocks, 
beginning  with  the  great  crop  failure  of  1894 
and  ending  with  the  Bryan  scare  of  1896,  was 
too  severe  for  rapid  recovery.  Accordingly, 
even  this  year,  stocks  which  were  sold  in  1890  or 
1892  for  about  $140  could  still  have  been  pur- 
chased at  an  average  of  $103.  Money  rates, 
however,  were  again  very  much  lower  in  1897 
which  again  gave  an  impetus  to  new  enterprises. 

1898 
With  this  year,  however,  the  period  of  im- 
provement was  well  under  way  and  it  was  aided 
by  another  year  of  good  crops,  the  total  amount- 
ing to  about  2,600,000,000  bushels.  Moreover, 
failures  decreased  to  1.10%  and  iron  production 
again  increased  to  over  11,773,000  tons,  although 
at  an  average  price  of  $11.66,  the  lowest  known. 
Over  3199  miles  of  new  railroad  were  construct- 
ed and  immigration  held  its  own.  Bank  clear- 
ings showed  a  tremendous  increase,  amounting 
to  over  $68,826,557,324  and  the  foreign  trade 


EVENTS  SINCE   1860  139 

to  over  $1,847,000,000.  Although  the  Spanish 
war  temporarily  disarranged  business,  it  was  so 
short,  that  it  acted  in  the  end  as  a  great  stimu- 
lus to  trade ;  therefore,  the  end  of  the  year  found 
the  country  prosperous  with  money  rates  grad- 
ually strengthening  to  correspond. 

1899 
This  was  the  beginning  of  a  year  of  distinct 
prosperity.  The  country  was  again  blessed  with 
good  crops  amounting  to  over  2,625,000,000 
bushels ;  money  rates  were  very  low,  failures  de- 
creased to  the  unprecedentedly  low  figure  of.8i% 
and  iron  production  increased  to  over  13,620,- 
703  tons  with  a  jump  in  price  to  $18  a  ton. 
Moreover,  4,512  miles  of  railroad  were  con- 
structed and  immigration  increased  to  over  311,- 
000.  The  most  phenomenal  figures  of  the  year 
occurred  in  bank  clearings,  which  shows  a  figure 
of  over  $94,047,400,783  compared  with  $57,229,- 
070,956  in  the  two  years  previous.  Foreign 
trade  also  increased  so  that  this  year  was  one 
of  marked  success  in  every  avenue  of  commerce 
and  industry.  In  fact,  stocks  which  had  aver- 
aged closer  to  par  for  the  preceding  five  years 
increased  to  a  maximum  of  $151,  an  increase 
which  was  to  continue  with  its  ups  and  downs 
until  1902. 


140  BUSINESS  BAROMETERS 

1900 

Although  this  was  election  year,  always  one  of 
more  or  less  inactivity,  the  dullness  of  this  year 
was  not  as  severe  as  usual,  owing  to  the  many 
preceding  years  of  severe  liquidation  and  the 
present  low  money  rates.  Moreover,  crops  were 
again  full,  reaching  a  total  in  excess  of  the  pre- 
ceding year,  both  in  percentage  and  price.  New 
railroad  construction  fell  off  slightly,  but  immi- 
gration increased  over  130,000,  or  to  448,572, 
and  foreign  trade  to  over  $2,240,000,000.  There 
was  a  slight  falling  off  in  clearings  and  money 
rates  increased,  but  this  was  nothing  more  than 
to  be  expected  in  a  presidential  year.  Bryan 
again  ran  and  he  did  not  talk  so  much  about 
free  silver,  but  McKinley,  with  Roosevelt's  aid, 
was  elected  by  a  tremendous  majority. 
1901 

Had  it  not  been  for  poorer  crops,  this  would 
have  been  a  year  of  tremendous  prosperity.  As 
it  was,  failures  remained  at  the  very  low  figure 
of  .90%;  iron  production  increased  to  15,800,- 
000  tons;  new  mileage  constructed  to  over  4900 
miles;  immigration  to  over  487,000  and  bank 
clearings  to  the  unprecedentedly  high  figure  of 
$109,267,527,182  with  a  corresponding  increase 
in  foreign  trade,  while  money  rates  were  fairly 
easy. 


EVENTS  SINCE   1860  141 

In  the  fall  of  this  year,  however,  President 
McKinley  was  shot.  This  resulted  in  consider- 
able gloom  among  many  bankers  and  merchants, 
but  although  the  stock  market  temporarily  re- 
ceded at  the  time  of  his  death,  it  quickly  reacted. 
However,  as  there  had  been  several"  years  of 
marked  prosperity,  students  of  the  situation  rec- 
ognized in  this  event  the  sign  for  changed  con- 
ditions. The  Northern  Pacific  corner  which  had 
occurred  earlier  in  the  year,  was  in  itself  an  un- 
favorable sign  and  the  two  events  together 
caused  the  most  cautious  investors  to  change 
their  positions  from  the  bull  to  the  bear  side  of 
the  market. 

1902 
If  this  had  also  been  a  year  of  poor  crops,  a 
very  severe  depression  would  probably  have 
set  in  at  once,  but  this  year  we  again  had  the 
largest  crops  on  record  up  to  this  time,  amount- 
ing to  over  3,193,000,000  bushels.  Moreover, 
the  percentage  of  failures  continued  very  low  at 
..93%;  iron  production  increased  to  17,821,000 
tons  with  an  increase  in  price  to  over  $22  a  ton. 
Over  5,000  miles  of  new  railroad  were  con- 
structed and  bank  clearings  increased  to  $118,- 
023,298,740.  Foreign  trade  held  up  nearly  to 
the  high  figures  of  the  preceding  year. 


142  BUSINESS  BAROMETERS 

This  was  one  of  the  years  when  the  average 
business  man  and  manufacturer  were  very  op- 
timistic; when  the  daily  papers  were  prophesy- 
ing still  higher  prices  and  still  greater  activity, 
and  when  the  surface  conditions  were  apparent- 
ly more  satisfactory  than  ever  before.  How- 
ever, underlying  conditions  were  growing  less 
satisfactory  every  day  for  money  was  becoming 
dear,  and  securities  in  tremendous  volumes  were 
being  very  rapidly  issued.  This  latter  fact  should 
be  carefully  noted  as  the  figures  on  a  large  num- 
ber of  the  subjects  studied  under  Fundamental 
Statistics  then  showed  no  sign  of  any  approach- 
ing period  of  depression.  In  fact,  this  was  a 
year  when  there  was  considerable  discussion 
among  statisticians  as  to  whether  or  not  the  fig- 
ures collected  did  signify  a  decline.  Men,  how- 
ever, who  recognized  the  meaning  of  the  tre- 
mendous increase  in  new  securities  issued,  knew 
that  a  day  of  reckoning  must  come  soon,  and 
consequently  the  signal  was  given  to  liquidate. 
The  average  of  the  ten  stocks  which  could  have 
been  purchased  in  1897  at  103  reached  a  max- 
imum of  201  and  those  who  sold  had  the  ad- 
vantage of  a  splendid  profit.  However,  there 
were  many  who  did  not  believe  that  a  period  of 
depression  was  about  to  come  and  therefore  did 


EVENTS  SINCE   1860  143 

not  sell,  but  carried  their  stocks  through  the 
depression  of  the  following  year. 
1903 
This  year  there  was  a  falling  off  in  crops,  the 
total  production  of  corn  and  wheat  amounting 
to  only  2,800,000,000  bushels;  the  percentage  of 
failures  increased  to  1.12%  and  iron  production 
showed  but  a  slight  increase  with  a  falling  off 
in  the  price.  Moreover,  railroad  construction 
decreased  to  4675  miles  and  bank  clearings  fell 
off  to  $109,209,187,764.  Immigration  and  foreign 
trade  showed  an  increase  and  money  rates  were 
again  high.  In  justice  to  those  statisticians  who 
found  no  signs  for  a  depression  of  1903,  it  must 
be  said  that  these  figures  were  not  extremely 
unsatisfactory  and  under  certain  conditions 
would  be  considered  satisfactory.  In  fact,  had 
it  not  been  for  the  very  great  increase  in  securi- 
ties, there  probably  would  have  been  no  depres- 
sion this  year.  However,  owing  to  the  stock 
market  troubles,  labor  troubles,  and  certain 
other  conditions,  this  year  was  one  of  depression, 
although  the  depression  lasted  only  one  year. 

1904 
This  year  there  was  an  increase  in  crops  and 
the  percentage  of  failures  decreased.    Although 
the  production  of  iron  decreased,  the  number  of 


144  BUSINESS  BAROMETERS 

miles  of  new  railroad  increased  and  immigra- 
tion almost  held  its  own.  Bank  clearings  also 
increased  to  $112,621,022,711  and  foreign  trade 
slightly.  Money  rates  again  became  lower  and 
the  banking  situation  became  much  sounder. 

Moreover,  this  year  the  disagreement  among 
statisticians  as  to  underlying  conditions  was 
cleared  up  and  all  united  in  recognizing  that 
whatever  the  figures  on  underlying  conditions 
had  shown  during  the  past  two  years,  there 
was  now  a  distinct  improvement  and  those  who 
sold  stocks  at  an  average  price  of  over  $200  in 
1902  now  repurchased  at  an  average  of  $152. 

1905 
Again  tremendous  crops  blessed  the  country 
and  failures  decreased  to  .85%.  Iron  production 
increased  to  about  23,000,000  tons  and  the  price 
increased  to  nearly  $18  a  ton.  Over  5,050  miles 
of  new  railroad  were  constructed  and  immigra- 
tion increased  to  the  unprecedentedly  high  figure 
of  1,026,499  arrivals.  Bank  clearings  made  the 
greatest  jump  in  the  history  of  the  country,  in- 
creasing from  $112,621,012,711  in  1904  to  $143,- 
909,448,446  in  1905.  Foreign  trade  likewise  in- 
creased to  over  $2,600,000,000.  Moreover,  low 
money  rates  prevailed  and  industries  of  all  kinds 
resumed  operation. 


EVENTS  SIXCE   1860  145 

1906 

This  year  produced  the  greatest  crops  in  the 
history  of  the  United  States,  the  total  amount- 
ing to  over  3.620,000,000  bushels  while  failures 
decreased  to  the  lowest  percentage,  namely  .'J'J^, 
Iron  production  again  increased  to  over  25,000,- 
000  tons  and  the  price  to  about  $21  a  ton.  5642 
miles  of  new  railroad  were  constructed  and  im- 
migration again  increased  to  over  1,100,000  per- 
sons. The  most  wonderful  showing,  however, 
occurred  in  the  figure  for  clearings  which 
amounted  to  over  $159,808,640,000,  with  a  for- 
eign trade  figure  of  nearly  $3,000,000,000. 

This  and  the  preceding  year  were  of  such 
marked  prosperity  and  the  prices  of  stocks  were 
so  very  high  that  many  of  the  large  interests  be- 
gan to  liquidate  and  the  stocks  which  were  pur- 
chased for  around  par  in  1897,  sold  at  over  200 
m  1902,  and  were  again  purchased  for  about 
150  in  1904,  were  again  sold  at  prices  ranging 
from  210  to  220  in  1905-1906.  Not  only  was 
the  prosperity  too  great  in  1906  to  be  normal; 
but  money  rates  were  increasing  and  political 
conditions  became  rather  unsatisfactory  and 
President  Roosevelt's  various  messages  and  law- 
suits were  the  "unforeseen  events"  which  caused 
the  change  in  conditions.  Some  students  of  the 
situation   blamed   President    Roosevelt    for   the 


146  BUSINESS  BAROMETERS 

change  in  conditions,  but  had  he  not  called  a 
halt,  very  much  greater  disaster  would  have 
come  to  the  country  later  on.  He  did  call  a  halt 
and  although  indirectly  this  was  a  great  benefit  to 
the  country,  its  immediate  effect  was  to  cause  the 
large  bankers  and  merchants  to  change  their  po- 
sition from  the  bull  to  the  bear  side  of  the  mar- 
ket. Liquidation,  therefore,  commenced,  securities 
and  merchandise  were  sold  and  stocks  of  all 
-classes  declined  in  price.  The  money  situation 
M^as  especially  strained  as  the  depression  of  1903 
was  not  severe  enough  to  liquidate  many  ac- 
counts which  should  have  been  cleared  up. 
Therefore  in  March  of  the  following  year,  the 
large  interests  withdrew  their  support,  stocks 
tumbled  in  price,  banks  were  allowed  to  fail  and 
again  people  were  allowed  to  shift  for  them- 
selves. 1907 

In  the  spring  of  this  year  came  reports  of  un- 
favorable crops  which,  in  fact  eventually  amount- 
»ed  to  over  3,200,000,000  bushels,  but  money  again 
was  scarce  and  the  scarcity  was  sufficient  to 
cause  the  last  of  the  stock  operators  to  change 
their  position  from  the  bull  to  the  bear  side  of 
the  market.  Failures  began  to  increase.  There 
was  no  appreciable  increase  in  iron  production. 
The  number  of  miles  of  new  railroad  constructed 
fell  to  5499  and  the  bank  clearings  to  $145,175,- 
733493.     Immigration  showed  an  increase  and 


EVENTS  SINCE   1860  147 

also  the  balance  of  trade.  Students  of  the  sit- 
uation had  made  up  their  minds  that  a  change 
was  coming  and  that  nothing  could  withstand 
it.  As  is  usually  the  case,  there  was  no  change 
in  surface  conditions  until  the  fall,  but  under- 
lying conditions  began  to  rapidly  become  more 
unsatisfactory  early  in  the  year  and  all  who 
were  studying  the  published  figures  had  fair 
warning  of  the  coming  period  of  depression. 
1908 

The  crops  for  1908  likewise  were  not  very 
satisfactory,  amounting  to  only  3,276,744,000 
bushels, — about  the  same  as  1907.  Failures, 
moreover,  increased  to  1.08;  bank  clearings 
were  reduced  to  $132,272,000,000;  the  iron  out- 
put was  only  15,936,018  tons,  with  a  gradual 
reduction  of.  price.  The  volume  of  trade  was 
$2,849,357,289.  New  railroad  mileage  was  es- 
timated at  5.730. 

The  decline  tn  the  stock  market  of  the  previous 
year  was  now  being  followed  by  a  severe  de- 
cline in  manufacturing  and  general  business.  As 
has  universally  been  true  in  the  past,  high  mon- 
ey rates  were  followed  by  a  break  in  the  stock 
market,  which  in  turn,  was  followed  a  year  later 
hy  a  business  depression,  accompanied  with  low 
money  rates.  These  rates  held  low  for  about 
another  year  when  the  price  of  stocks  began  to 
rise  and  commodity  prices  began  to  fall.  The 
•country  was  at  this  point  on  December  31,  190S. 


CHAPTER  VI. 


TWENTY-FIVE  SUBJECTS  STUDIED  UNDER  FUNDA- 
MENTAL STATISTICS 


I 


HEN  interpreting  the  meaning  of 
the  following  twenty-five  sub- 
jects, one  must  remember  that  it  is 
first  necessary  to  decide  in  which 
of  the  four  periods  the  country 
is:  whether  it  is  in  a  period  of  de- 
pression, a  period  of  improvement,  a  period  of 
prosperity,  or  a  period  of  decline.  The  figures 
always  show  this  very  plainly ;  but  one  can  read- 
ily check  his  opinion  by  referring  to  our  Week- 
ly Barometer  Letters  which  always  take  a  de- 
cided stand  at  this  point.  This  first  step,  how- 
ever, is  absolutely  necessary,  as  it  is  impossible 
to  determine  the  duration  of  the  present  period, 
when  the  next  change  will  come,  and  what  it 
will  be  (which  of  course  Is  what  the  banker, 
merchant  and  investor  desires  to  know)  without 
know^ing  what  the  present  conditions  indicate. 
This  is  due  to  the  fact  that  the  same  change  in  the 
figures  of  a  given  subject  signify  different  results 
under  different  periods;  for  example,  during  a 
period  of  depression,  an  increase  of  Bank  Clear- 
ings is  a  favorable  sign,  but  during  a  period  of 


THE  TWENTY-FIVE  SUBJECTS  149 

.  prosperity  a  great  increase  is  a  dangerous  sign. 
After  deciding  in  what  period  the  country  is, 
each  set  of  subjects  must  be  interpreted  in  ac- 
cordance with  certain  rules.  In  other  words, 
with  a  given  subject  a  decrease  signifies  one 
thing,  an  increase  signifies  another,  while  no 
change  signifies  a  third.  Therefore,  the  figures 
on  each  subject  should  be  examined  independent- 
ly to  ascertain  whether  the  figures  show  a  de- 
crease, an  increase,  or  no  change.  The  new 
figure,  what  ever  it  is,  will  then  be  interpreted 
as  to  whether  it  shows  "more  satisfactory  con- 
ditions," "less  satisfactory  conditions,"  or  "un- 
certainty." After  reaching  this  conclusion,  rel- 
ative to  what  the  figures  on  the  subject  under 
consideration  signify,  a  note  should  be  made  of 
the  result. 

Each  subject  is  treated  in  this  manner  and  a 
conclusion  reached  on  each.  All  of  these  con- 
clusions are  then  summarized  and  one  counts 
how  many  subjects  signify  an  improvement,  how 
many  signify  a  decline  and  how  many  signify 
something  else.  All  of  these  are  averaged, 
although  a  different  amount  of  weight  may  be 
given  to  one  subject  than  to  another,  and  a  con- 
clusion reached  as  to  the  duration  of  the  present 
period  and  what  the  next  change  will  be. 


150  BUSINESS  BAROMETERS 

In  short,  the  study  of  Fundamental  Statistics 
consists  simply  of  obtaining  the  latest  figures  on 
any  one  subject,  noting  their  trend  and  comparing 
both  the  figures  and  the  trend  with  normal  fig- 
ures and  normal  trends  for  said  subject,  in  treat- 
ing all  the  various  subjects  in  this  same  way 
and  finally  deducing  one  final  conclusion  as  to 
whether  the  figures  and  thd  general  trend  of  the 
figures  on  all  the  subjects,  taken  as  an  entirety, 
are  becoming  more  normal  or  less  normal. 

If  the  summary  -figure  for  present  condi- 
tions is  much  greater  than  that  for  normal  con- 
ditions, this  signiHes  that  there  may  he  a  change 
for  the  ivorse  at  any  time;  hut  if  the  summary 
■figure  for  present  conditions  is  less  than  that 
for  normal  conditions,  this  signifies  that  there 
may  be  a  change  for  the  better  at  any  time. 
Moreover,  the  greater  the  difference  between  the 
respective  summary  figures  for  present  condi- 
tions and  for  jprmal  conditions,  the  sooner 
the  change  may  me  expected.  When  the  sum- 
mary figures  are  approximately  the  same,  the 
conditions  may  be  expected  to  remain  as  they 
are  or  to  be  what  is  technically  known  as  "ir- 
regular." 


BUILDING   STATISTICS  15? 

Wealth,  Building  and  Real  Estate  Operations 
as  Barometers  of  the  Country's  Growth 

"Wealth,"  according  to  Theodore  E.  Burtom 
comprises  "  all  things  which  are  alike  usefuU 
limited  in  supply,  and  transferable.  All  wealth 
is  produced  from  or  created  by,  land,  labor,  or 
capital.  Land  includes  every  form  of  nature  in 
earth,  seas,  or  air,  together  with  the  natural 
forces  which  may  be  set  at  work.  It  is  the 
source  of  our  so-called  "raw  materials."  La- 
bor includes  physical  strength  and  exer- 
tion, and  the  mental  qualities  which  furnish 
them  with  method  and  ingenuity. 

Capital,  technically  defined,  is  wealth  with- 
held from  immediate  consumption  for  the  pur- 
pose of  producing  wealth  in  the  future.  It  in^ 
eludes  food,  clothing  and  fuel  for  support  of 
those  engaged  in  production  of  wealth,  neces- 
sary seed  for  planting,  raw  materials  for  the 
finished  products  of  manufactures  or,  if  we  look 
at  the  subject  from  the  standpoint  of  the  em- 
ployer or  capitalist,  money  fof  wages  arfd  the 
purchase  of  supplies.  These  may  be  included 
in  the  term  circulating  capital.  There  is  also 
fixed  capital,  which  included  tools,  machines, 
factories,  buildings  occupied  or  used  by  those 
engaged  in  productive  employment,  improve- 
ments upon  land,  likewise  ships  and  railways  with 


152  BUSINESS  BAROMETERS 

all  their  equipment.  Nations  are  rich  or  poor  not 
in  proportion  to  the  amount  of  land  or  natural  re- 
sources which  they  have,  but  in  accordance  as 
they  have  an  abundance  or  lack  of  capital." 

The  above  describes  what  is  technically  known 
as  "wealth."  A  concrete  example  of  what  con- 
stitutes wealth  may  be  found  in  the  following 
tables. 

The  figures  are  made  up  by  the  Bureau  of 
the  Census,  Washington,  and  as  reported  for 
the  census  years  are  carefully  compiled  records 
of  actual  values  as  appraised  under  the  general 
terms,  real  and  personal  property.  The  figures 
for  all  years  between  the  census  years  are  es- 
.  timates,  and  show  proportional  changes,  based 
'  somewhat  upon  partial  returns  in  some  of  the 
items  included.  The  following  tables  show  ex- 
actly the  forms  of  wealth  comprising  the  total 
$107,104,211,917,  the  estimate  of  1904. 

ESTIMATED     WEALTH     OF     THE     UNITED 
STATES. 

Latest  Estimate 
1904  1900 

$107.  104,  211,  917  188,  517,  306,775 
Real  property  taxed  ..  $55,510,247,564  j;46,324,839,234 
Real  property  exempt  6,831,244,570       6,212,788,930 

Live  stock 4»07379i.736       3.306,473.278 

Farm  implements  and 

machinery 844,989,863  749.775.970 


BUILDING  STATISTICS  153 

Gold  and  silver  coin  and 

buillion   1,998,603,303  1,677,379,825 

Manufacturing    machin- 
ery, tools,  etc 3,297,754,180  2,541,046,639 

Railroads     and     their 

equipments     11,244,752,000  9,035, 732,ooo 

(a)  Street  railways,  etc.  4,840,546,909  3,495,228,359 

(b)  All  other  property  .  18,462,281,792  15,174,042,540 
Grand  total 107,104,211,917  $88,517,306,775 

a.  Street  railways,  etc.     (itemized) 

Street  railways $2,219,966,000  $1,576,197,160 

Telegraph  systems 227,400,000  211,650,000 

Telephone  systems    585,840,000  400,324,000 

Pullman  and  private  cars  .. .  123,000,000  98,836,600 

Shipping  and  canals 846,489.804  537,849.478 

Privately  owned  water  works  275,000,000  267,752,468 
Privately  owned  electric  light 

and  power  stations 562,851,105  402,618,653 

Total 4,840,546,909  3.495.228.35^ 

b.  All  other  property  (itemized) 

Agricultural  products $1,899,279,652  $1,455,069,323 

Manufacturing  products  ... .  7,409,291,668  6,087,151,108 

Imported  merchandise   495.543.685  424.970,593 

Mining  products    408,066,787  326,851,517 

Clothing  and  personal  orna- 
ments . ; 2,500,000,000  2,000,000,000 

Furniture,  carriages,  etc  ... .  5,750,000,000  4,880,000,000 

Total 18,462,281,792  15,174.042,540 

NOTE: —  C.  A.  Conant,  who  was  authorized  by  the  Census  to 
estimate  outstanding  securities  in  the  United  States,  gave  in  the 
Atlantic  Monthly  for  January  1909  a  preliminary  estimate  of  $34,514, 
351,382  or  $414.54  per  capita,  of  which  $10,120,418,699  is  held  by 
holding  companies.  He  figured  the  outstanding  securities  in  Great 
Britain  as  $26,400,000,000  or  $616.97  per  capita;  in  France  $19,500,- 
000,000  or  $50.0.94  per  capita;  Germany  $10,000,000,000  or  $177.41 
per  capita;  and  in  Holland  $2,200,000,000  or  $405.08  per  capita.  For 
fourteen  countries  the  aggregate  is  $111,077,764,333  or  $196.17  per 
capita. 

Because  the  census  figures  are  the  only  sta- 
tistics which  give  the  actual  value  of  prop- 
erty in  the  country,  and  since  a  complete  state- 
ment is  made  only  once  in  ten  years,  the  needs 


154  BUSINESS  BAROMETERS 

of  fundamental  statistics  lead  to  the  adoption 
of  certain  other  reports  which  may  be  expected 
to  serve  as  barometers  of  the  conditions  termed 
wealth  by  our  first  proposition. 

Building  statistics,  including  railroad  and 
municipal  construction,  give  us  figures  which 
show  that  the  value  of  land  is  improving  more 
or  less,  that  railroad  property  is  increasing,  or 
that -towns  and  cities  are  adding  lighting  plants, 
water  supplies,  or  public  buildings  in  greater 
or  less  amount.  Because  of  a  new  house  cost- 
ing $10,000  all  land  on  the  same  street  im- 
proved and  the  valuation  of  the  whole  city  is 
some  thousands  of  dollars  greater  at  the  next 
census  taking.  A  factory  put  in  the  same  street 
might  reduce  the  real  estate  value  as  residence 
property,  but  would  so  react  upon  the  city  as 
a  whole  as  to  greatly  increase  its  entire  wealth. 

The  difficulty  of  obtaining  accurate  reports 
of  building  is  one  that  has  been  an  obstacle 
heretofore  in  the  way  of  systematic  study  of 
the  subject.  The  laws  of  cities  and  states  are 
so  different,  that  the  returns  from  building  per- 
mits alone,  are  not  reliable  as  a  basis.  But 
from  the  point  of  view  of  the  contractors,  an- 
other set  of  figures  is  to  be  had.  The  best  of 
these  have  been  developed  by  the  F.  W.  Dodge 


BUILDING   STATISTICS  155 

Co.,  of  Boston.  The  business  of  this  firm  is 
to  make  a  thorough  canvass  of  the  principal 
fields  of  constructive  activity  in  order  to  fur- 
nish accurate  information  of  business  openings 
for  contractors  and  supply  firms  of  all  kinds. 
Reports  gathered  by  this  very  thorough  sys- 
tem of  learning  of  all  building  in  process  of 
construction  in  New  England,  have  been  pub- 
lished from  time  to  time  for  many^  years. 
Through  the  New  York,  Chicago  and  other 
offices,  the  firm  has  in  its  possession  very  ac- 
curate, well-classified  statistics  of  new  con- 
struction, both  projected  and  started,  in  other 
sections  of  the  country,  which  they  are  now 
putting  in  shape  for  the  service  of  fundamental 
statistics.  The  reports  may  be  expected  to  cov- 
er the  new  work,  both  in  private  and  municipal 
building  and  railroad  construction,  while  the 
values  given  will  be  conservative  and  the  result 
of  careful  inquiry  by  trained  observers. 

Fire  losses  as  reported  monthly,  include  all 
fires,  and  show  the  total  destruction  of  tim- 
ber, rolling  stock  of  railroads,  wharfage  and 
shipping,  as  well  as  buildings  of  all  kinds.  As 
in  the  case  of  construction  or  building  statis- 
tics, the  amounts  given  in  these  fire  loss  tables 
cannot   be   compared   directly   with   the   census 


156  BUSINESS  BAROMETERS 

figures  on  wealth.  Sometimes  the  insurance  loss 
is  given,  sometimes  the  assessed  valuation, 
sometimes  an  estimate,  as  in  buildings  and  con- 
tents under  appraisal.  The  direct  loss  by  for- 
est fires  is  hard  to  determine  exactly,  while  the 
indirect  losses,  so  well-known  to  the  students 
of  forestry,  are  incalculable  at  frequent  inter- 
vals. The  monthly  record,  however,  is  a  val- 
uable indicator  of  conditions  likely  to  contribute 
to  the  improvement  or  decline  of  business  and 
should,  for  that  reason,  be  watched.  Con- 
ditions of  poverty  following  fires,  or  gen- 
eral improvement  as  a  result  of  new  construc- 
tion, are  both  necessary  and  valuable  barome- 
ters of  business  and  show  where  to  increase  or 
decrease  investment  in  land,  labor  and  capital 
for  the  increase  of  wealth. 

Another  factor  of  importance,  and  bearing  a 
relation  to  the  second  group  of  subjects  we  are 
considering,  is  the  real  estatq  business.  To 
understand  rightly  the  financial  condition  of 
this  country,  we  should  know  the  history  of 
real  estate  booms  and  watch  for  increased  rents 
either  of  land  or  buildings.  During  the  hard 
times  of  the  winter  following  the  crisis  of  1907, 
some  of  the  leading  manufacturers  reduced  their 
rents  fifty  per  cent,  some  more  and  some  less. 


BIJIIiDING  STATISTICS  157 

By  such  means,  they  could  hope  to  keep  their  em- 
ployees on  hand  for  renewed  production.  Such  ac- 
tion was  an  attempt  to  meet  the  wage-earner  half 
way  and  is  directly  opposed  to  the  spirit  of  that 
real  estate  boom,  the  chief  phase  of  which  is 
an  arbitrary  raising  of  rents  for  tenements  of  all- 
kinds.  Such  an  advance  is  usually  seen  in  times 
of  improvement  and  especially  towards  the  cul- 
mination of  a  period  of  prosperity  when  rising 
wage-scales  attract  the  attention  of  the  house 
owner,  who  raises  his  rents,  and  reaps  his  har- 
vest, at  the  same  time  that  commodity  prices 
and  security  markets  are  rising.  A  study  of 
the  statistics  will  show  that  real  estate  values 
are  very  good  business  barometers.  New  land 
developed,  irrigation  systems  introduced,  and 
a  variety  of  similar  factors  may  seem  to  be  the 
causes  of  booms  here  and  there;  but  none  of 
these  enterprises  can  be  carried  on  without  the 
active  investment  of  capital  and  that  activity 
will  not  continue  unless  conditions  are  right. 

So,  for  the  purposes  of  fundamental  statis- 
tics, beside  the  official  figures  on  wealth,  there 
should  be  included  these  three  subjects:  new 
railroad  and  building  construction,  real  estate 
values  and  operations,  and  fire  losses.  These 
subjects  give  us  a  gauge  of  conditions  more 
frequently  than  once  in  ten  years. 


153  BUSINESS  BAROMETERS 

As  the  business  man  is  much  more  interested 
in  the  relation  of  wealth  to  prosperity  than  in 
any  definitions,  it  is  interesting  to  note  history 
and  ascertain  how  the  wealth  of  the  country  has 
affected  conditions  in  the  past.  The  first  great 
crisis  which  this  country  experienced  was  in 
1837;  it  was  preceded  by  six  years  of  great  ac- 
tivity. The  railroad  mileage  of  the  country  had 
grown  from  23  miles  in  1830  to  1500  miles  in 
1837.  Simultaneously  with  this  growth  in  rail- 
road mileage,  new  towns  had  been  founded,  new 
enterprises  opened,  desert  lands  had  become  tax- 
able, farm  property  and  the  wealth  of  the  coun- 
try had  rapidly  increased.  If  the  reader  will 
turn  to  the  records  of  this  time,  he  will  find 
that  there  was  a  greater  increase  between  1832 
and  1837  than  during  any  previous  ten  years 
of  our  history.  A  great  number  and  variety  of 
new  enterprises  were  started,  the  bank  deposits 
were  large  and  there  was  great  interest  in  trad- 
ing, shipping,  manufacturing  and  real  estate. 
In  fact,  this  great  increase  in  real  estate  specula- 
tion resulted  in  greatly  increasing  the  assessed 
valuation  of  both  city  and  country  property. 

The  second  great  crisis  came  in  1857,  which 
likewise  was  preceded  by  a  period  of  great  in- 
crease in  wealth.  After  the  panic  of  1837,  came  a 


BUILDING  STATISTICS  159 


period  of  great  depression  and,  although  condi- 
tions improved  in  1844  and  1845,  there  was  no 
great  advance  until  the  discovery  of  gold  in  1849. 
In  1852,  California  vi^as  actually  sending  millions 
of  dollars  worth  of  gold  to  New  York.  Ship- 
ping received  a  tremendous  impetus  both  on  ac- 
count of  the  trade  with  California  and  of 
the  Crimean  War  in  1854  and  1855. 
There  was  also  a  great  increase  in  railroad 
mileage,  which  advanced  from  only  5600  miles 
in  1847  to  24,500  miles  in  1857.  In  other  words, 
in  1830  there  were  but  23  miles  of  railroad  and 
in  1837,  the  year  of  the  panic,  this  had  been 
increased  to  1500  miles.  During  the  ten  years 
between  1837  and  1847,  less  than  3400  miles  of 
new  track  were  constructed,  yet  in  the  ten  years 
trom  1847  to  1857  about  20,000  miles  were  con- 
structed. When  studying  such  figures  it  ap- 
pears very  easy  to  have  prophesied  a  panic  for 
1857.  With  the  building  of  these  20,000  miles, 
thousands  of  new  towns  were  settled,  millions 
of  acres  of  hitherto  untaxed  land  became  tax- 
able as  farm  land,  and  a  vast  number  of  manu- 
facturing and  other  enterprises  w^ere  started. 
This  resulted  in  another  great  increase  in  wealth 
equalled  only  by  the  increase  which  preceded  the 
panic  of  1837.     As  a  result,  the  panic  of  1857 


160  BUSINESS  BAROMETERS 

followed,   which   resulted    in   bankruptcies,   sui- 
cides, and  widely  distributed  destitution. 

The  third  great  crisis  was  in  1873;  this  was 
caused  by  a  number  of  factors  and  the  increase 
in  wealth  was  certainly  one  of  them.  The  Civil 
War  was  accompanied  by  a  great  destruction 
of  property  and  a  consequent  reduction  in 
wealth.  This  was  due  partly  to  deterioration  of 
values  and  the  depreciation  of  the  currency ;  but 
largely  to  the  fact  that  the  attention  of  the  peo- 
ple had  been  turned  away  from  productive  in- 
dustry. Plough-shares  had  been  turned  into 
swords  with  the  accompanying  decrease  in  pro- 
duction. When  the  Civil  War  was  over,  both 
the  South  and  the  North  again  gave  their  at- 
tention to  agriculture,  manufacturing  and  com- 
merce, and  the  result  was  an  unprecedented  re- 
bounding. During  the  early  'sixties,  taxable 
property  decreased;  during  the  early  'seventies 
it  rapidly  increased.  The  gain  in  wealth  be- 
tween 1868  and  1873  was  greater  than  it  ever 
had  been  in  the  history  of  the  country. 

If  later  panics  (that  is,  the  panics  of  1884, 
1893  ^^^  1903)  ^re  studied,  the  same  law  will 
be  found  to  be  true  in  these  cases.  We  can 
therefore  confidently  affirm   that   a   "Period   of 


BUILDING  STATISTICS  161 

Abnormal  Increase  in  Wealth"  is  sure  to  be  fol- 
lowed by  a  "Period  of  Depression." 

These  illustrations  are  sufficient  to  show  how 
deeply  the  investor's  and  merchant's  interests 
are  concerned  in  this  subject.  Whether  a  small 
store-keeper,  a  retailer,  a  manufacturer  or  great 
merchant,  his  welfare  is  most  intimately  related 
to  the  total  wealth  of  the  country.  Many  les- 
sons for  all  classes  of  people  may  be  drawn 
from  this  fact. 

The  following  are  certain  conclusions  relative 
to  "Building  Operations." 

1.  During  a  period  of  Business  Depression. 

(a)  An    increase    forecasts    better    condi- 
tions. 

(b)  A   decrease    forecasts    continued    de- 
pression. 

(c)  No  change  signifies  conditions  to  be 
stationary. 

2.  During  a  period  of  Improvement  following 
a  period  of  Business  Depression. 

(a)  An    increase    forecasts    a    period    of 
prosperity. 

(b)  A  decrease  forecasts  a  set-back. 

(c)  No  change  suggests  caution. 

3.  During  a  period  of  Prosperity. 


162  BUSINESS  BAROMETERS 

(a)  A  great  increase  usually  calls  for  cau- 
tion. 

(b)  A  decrease  may  tend  to  lengthen  the 
period  of  prosperity. 

(c)  No  change  signifies  conditions  to  be 
stationary. 

4.     During   a    Period    of   Decline    Folowing   a 
Period  of  Prosperity. 

(a)  An   increase   is   indicative   of   further 
trouble. 

(b)  A   decrease    is    natural   ttnder   these 
conditions. 

(c)  No  change  suggests   caution. 

Money  in  Circulation 

This  subject  may,  at  first  thought,  seem  un- 
interesting and  of  little  concern  to  the  merchant 
or  manufacturer;  yet,  as  a  matter  of  fact,  the 
"Amount  of  Money  in  Circulation"  is  of  vital 
interest  not  only  to  the  merchant  and  manufac- 
turer, but  also  to  the  humblest  store-keeper  and 
day  laborer.  The  trade  of  the  corner  grocery 
store  is  regulated  by  the  amount  of  money  in 
circulation  in  the  neighborhood :  and  the  amount 
of  money  in  circulation  in  the  neighborhood  is 
dependent  upon  the  amount  circulating  in  the 
entire  country.  As  the  local  banks  in  every 
small   town   have   deposits   in   some   large   city 


MONEY  IS   CIRCtlLATION  163 

such  as  New  York,  Chicago  or  St.  Louis,  mon- 
ey cannot  be  abundant  in  one  city  and  scarce 
in  another,  except  for  a  very  short  time.  The 
banks  of  the  various  cities  are  so  related  through 
the  great  banking  institutions  of  the  large 
cities,  that  money — like  w^ater — immediately 
seeks  its  own  level.  As  a  result,  all  parts  of 
the  country  must  prosper  or  suflfer  in  accordance 
with  the  amount  of  money  in  circulation.  The 
store-keeper  must,  therefore,  study  figures  of 
the  entire  country,  and  not  simply  the  condi- 
tions in  his  own  town  or  in  his  own  neighbor- 
hood. 

Many  a  mill  has  been  closed  and  many  a 
laborer  ibeejn  thrown  out  of  efnployment  be- 
cause employers  could  not  obtain  enough  actual 
money  to  pay  wages.  In  times  of  prosperity 
such  conditions  are  hard  to  conceive;  neverthe- 
less, they  have  happened  and  will  recur.  Some- 
times mills  continue  to  operate  by  paying  their 
employees  by  check,  although  this  is  a  very  un- 
satisfactory method  unless  the  checks  can  be 
readily  cashed.  We  know  of  one  city  in  Massa- 
chusetts where  for  several  weeks  in  1907,  all 
of  the  factory  hands  and  clerks  were  paid  in 
checks,  and  moreover  by  checks  marked  "Pay- 
able only  through  Clearing  House."     Checks  so 


164  BUSINESS  BAROMETERS 

marked  cannot  be  cashed.  The  holders  can  only 
deposit  them  in  the  bank  and  draw  new  checks 
against  them.  However,  since  these  new  checks 
were  also  marked  "Payable  only  through  Clear- 
ing House,"  it  was  still  impossible  for  the  em- 
ployees to  obtain  their  cash.  As  95%  of  the 
employees  had  no  bank  account,  the  only  prac- 
tical method  was  for  each  to  give  his  check  to 
one  of  the  local  store-keepers,  receiving  credit 
for  the  amount.  As  the  man  was  obliged  to 
leave  the  full  amount  of  the  check  at  one  store, 
he  found  it  advisable  to  select  a  large  depart- 
ment store,  carrying  dry  goods,  groceries,  med- 
icines and  other  goods.  The  result  was  that 
the  business  of  the  small  store-keepers,  except- 
ing that  derived  from  their  regular  "charge" 
customers,  was  almost  ruined  during  this  per- 
iod;  the  cash  business  of  a  store  that  ordinarily 
amounted  to  $100  a  day  decreased  to  only  $10 
a  day.  This  is  but  one  illustration ;  it  shows, 
nevertheless,  how  vital  an  interest  even  the 
humblest  classes  have  in  the  amount  of  money 
in  circulation. 

It  is  of  equal  importance  to  the  large  mer- 
chants and  to  the  manufacturers.  The  small  re- 
tailer who  buys  only  what  goods  he  can  sell,  im- 
mediately, ceases  purchasing  as  soon  as  his 
business   diminishes.     This   immediately   affects 


MONEY   IX   CIRCULATION  16S 

the  business  of  the  larger  manufacturer,  who  in 
turn  ceases  to  purchase  from  the  farmers  and 
producers.  Since  the  small  manufacturer  buys 
new  material  only  as  needed  for  actual  manu- 
facture, he  ceases  purchasing  in  direct  propor- 
tion to  the  reduction  of  his  help.  The  great  mer- 
chants and  manufacturers  do  not  feel  the  effect, 
possibly  until  later;  but  when  the  blow  does 
come,  they  feel  it  to  a  greater  extent  than  the 
small  dealer.  It  may  be  plainly  seen,  therefore, 
that  the  amount  of  money  in  circulation  direct- 
ly affects  everyone,  whether  a  laborer,  clerk,  a 
small  store-keeper,  a  merchant,  a  large  manu- 
facturer or  the  railroad  company  which  trans- 
ports for  all. 
The  Terms  Defined. 

In  the  discussion  of  this  subject,  two  different 
"amounts"  are  referred  to,  viz; 

1.  The  net  amount  of  working  money  in  cir- 
culation. 

2.  The  gross  amount  of  money  per  capita, 
whether  hoarded  or  in  use. 

These  two  amounts  may  be  defined  as  follows : 
The  "net  amount  of  working  money  in  circu- 
lation" means  the  amount  of  actual  cash  held  by 
the  banks.  When  a  farmer  deposits  in  his  bank 
money  received  from  the  sale  of  cotton  in  Liv- 
erpool, he  increases  the  net  amount  of  working 


166  BUSINESS  BARO^iETERS 

money  in  circulation.  This  is  likewise  true  when 
a  bank  imports  gold  from  abroad.  When  a  de- 
positor becomes  frightened,  withdraws  money 
from  a  bank,  and  hides  it  in  his  house  or  in  a 
safe  deposit  box,  he  decreases  the  net  amount 
of  working  money  in  circulation.  The  same  is 
true  when  Americans  spend  money  in  Europe 
or  when  money  is  sent  abroad  in  payment  for 
securities  held  in  Europe.  But  "the  net  amount 
of  working  money  in  circulation"  is  affected  in 
another  way,  namely;  by  the  amount  of  money 
that  each  man  is  carrying  in  his  pocket.  If  a 
man  carries  eleven  dollars  in  his  pocket  instead 
of  one  dollar,  he  seldom  realizes  that  the  act  is 
affecting  the  financial  condition  of  the  country; 
but,  as  there  are  15,000,000  working  men  in  the 
United  States,  this  would  make  a  difference  of 
$150,000,000  in  the  net  amount  of  working  mon- 
ey in  circulation,  or  a  difference  of  $500,000,- 
000  in  the  banking  resources  of  the 
country.  Thus  the  net  amount  of  working  mon- 
ey in  circulation  represents  the  amount  which 
is  actually  in  the  banks  or  actually  at  work  in 
commerce  and  industry;  it  does  not  include  idle 
money  stowed  away  in  pocket-books  or  safe  de- 
posit boxes. 

"The  gross  amount  of  money  per  capita"  in- 
cludes all  money  in  the  United  States  whether 


MONEY  IN  CIRCriiATION  167 

it  is  in  the  bank  or  buried  in  the  ground,  at 
work  or  idle.  All  money  in  the  safe  deposit 
boxes  and  in  the  pockets  of  individuals  is  count- 
ed in  this  item.  This  at  the  present  time  amounts 
to  about  $35.00  per  capita  based  on  the  estimated 
population  of  the  United  States.  The  gross 
amount  of  money  per  capita  simply  represents 
the  total  of  the  gold  and  silver  coins  and  bills 
and  bank  notes  in  existence,  wherever  located  in 
the  United  States.  It  has  been  estimated  that 
in  order  to  keep  this  figure  in  the  vicinity  of 
$34  or  $35  per  capita,  it  is  necessary  to  create 
or  import,  about  $50,000,000  net  in  coin  and  bills 
each  year. 
The  Effect  upon  the  Merchant. 

Experience  has  shown  that  the  ''net  amount 
of  working  money  in  circulation"  cannot  be 
forecast  by  figures,  but  is  dependent  rather 
upon  sentiment.  In  other  words,  instead  of  be- 
ing dependent  upon  the  financial  condition,  it  is 
dependent  rather  upon  the  sentiment  of  the  peo- 
ple. This  net  amount  in  circulation  may  remain 
practically  constant  for  years  until  some  large 
failure,  scandal  or  rumor  of  w^ar  comes,  when 
the  people  lose  confidence  and  money  stops  cir- 
culating. In  such  cases  everybody  holds  all  he  has 
in  his  possession  and  free  circulation  is  stopped  or 


168  BUSINESS  BAROMETERS 

retarded.  Moreover,  the  net  amount  of  work- 
ing money  is  often  independent  of  the  gross 
amount  of  money  per  capita  in  circulation. 
Should  a  rumor  be  published  in  the  morning 
papers  that  some  great  financial  institution  is  in 
a  critical  condition,  the  net  amount  of  money  in 
circulation  would  immediately  be  affected  to  a 
greater  extent  than  would  be  possible  through 
years  of  legislation;  but  the  gross  amount  of 
money  per  capita  would  remain  constant.  Fur- 
thermore, such  rumors,  failures  or  scandals  are 
the  best  warnings  of  impending  contraction  of 
the  net  amount  of  money  in  circulation.  The 
study  of  statistics  in  such  instances  is  of  little 
value.  In  other  words,  as  soon  as  such  a  thing 
happens,  the  merchant  may  be  reasonably  cer- 
tain that  his  trade  will  be  diminished,  and  the 
effect  of  his  curtailment  will  be  felt  by  the 
wholesalers,  the  manufacturers  and  the  railroads. 
On  the  other  hand,  the  merchant  should  be 
equally  on  the  watch  for  the  time  when  confi- 
dence will  be  restored  and  when  the  people  will 
decide  to  part  with  the  money  they  have  been 
hoarding.  As  it  is  human  nature  to  hoard  mon- 
ey in  case  of  trouble,  it  is  also  human  nature  to 
forget  this  trouble  quickly.  Moreover,  people 
seem   unable   to   withhold  money   from  circula- 


MONEY  IX  CIRCULATION  l69 

tion  beyond  a  certain  length  of  time;  they  be- 
come uneasy  under  the  loss  of  interest,  and  it 
finally  occurs  to  them  that  their  money  is  in 
more  danger  in  their  houses  than  when  deposited 
in  a  bank.  Thus  periods  of  financial  stringency, 
which  are  caused  by  the  temporary  withdrawal 
of  money  from  circulating,  are  invariably  fol- 
lowed by  a  great  increase  in  the  net  amount  of 
working  money.  Nevertheless,  increase  in  the 
business  of  the  local  merchant  does  not  increase 
directly  in  proportion  to  the  increase  of  the  net 
amount  of  working  money.  While  business  falls 
off  when  the  ivorking  money  decreases,  the  re- 
verse is  not  true.  When  mills  are  closed  and 
people  are  out  of  employment,  they  acquire  fru- 
gal habits,  and  after  the  mills  again  start,  they  do 
not  at  once  begin  to  spend;  but  they  deposit 
their  savings  in  a  bank.  The  fact  remains, 
nevertheless,  that  after  these  periods  of  fright, 
money  becomes  very  plentiful  with  the  banks 
and  interest  rates  become  correspondingly  low, 
with  a  slow  but  gradual  increase  in  business. 
The  efficiency  of  money  depends  upon  its  rapid- 
ity of  calculation  and  a  contraction  in  the  net 
amount  of  working  money  always  causes  a  de- 
crease in  general  business  which  requires  some 
time  to  bring  it  back  to  its  normal  state. 


170  BUSINESS  BAROMETERS 

In  the  case  of  the  "gross  amount  of  money 
per  capita,"  entirely  dififerent  laws  prevail.  To 
quote  from  Theodore  E.  Burton's  admirable 
book  entitled  "Crises  and  Depressions": — "Par- 
adoxical as  it  may  seem,  the  starting  point  for 
crises  and  depressions  may  be  found  in  abun- 
dance rather  than  in  scarcity,  whether  in  money 
or  in  capital."  Here  he  refers  to  the  ''total 
gross  amount  of  money  per  capita'^  or  the  fig- 
ures which  are  shown  by  statistics.  These  sta- 
tistics may  be  obtained  from  the  United  States 
government,  which  prepares  a  table  each  month 
giving  estimates.  These  figures  usually  show 
a  continued  increase  up  to  a  certain  point,  when 
a  panic  or  depression  comes  over  the  country. 
This  is  probably  due  to  the  fact  that  panics  and 
depressions  are  so  often  caused  by  over  pros- 
perity,  and  that  this  gross  amount  of  money  per 
capita  is  a  good  barometer  of  prosperity.  There- 
fore, if  the  gross  amount  of  money  in  circulation, 
as  reported  by  the  government,  shows  a 
steady  increase  per  capita  for  several  years  and 
the  country  is  prosperous — mills  running  over 
time,  labor  in  great  demand,  and  everybody 
happy  and  contented — then  the  merchant  and 
manufacturer  should  be  on  the  watch  for  a  turn 
in  the  tide.    In  other  w^ords,  too  large  an  amount 


MONEY  IN  CIRCULATION  171 

of  money  per  capita  is  sure  to  be  followed  by  a 
period  of  disaster  and  trouble.  As  'Tride  com- 
eth  before  destruction  and  a  haughty  spirit  be- 
fore a  fall,"  so  it  is  likewise  true  that  ''a  large 
amount  of  money  appeareth  before  a  panic  and 
a  period  of  luxury  before  a  period  of  depres- 
sion." 

The  following  conclusions  may  be  of  interest 
relative  to  "Money  in  Circulation." 

1.  During  a  Period  of  Business  Depression. 

a.  An    increase   signifies    declining   money 
rates,  or  more  satisfactory  conditions. 

b.  A  decrease  signifies  higher  money  rates, 
or  less  satisfactory  conditions. 

2.  During  a  Period  of  Business  Improvement. 

a.  An  increase  forecasts  better  conditions. 

b.  A   decrease    forecasts   a   check  or   set- 
back. 

c.  No  change  suggests  caution. 

3.  During  a  Period  of  Prosperity. 

a.  A  large  increase  calls  for  caution. 

b.  A  sudden  decrease  signifies  higher  mon- 
ey rates  and  calls  for  caution. 

c.  No  change  signifies  continued  prosper- 
ity. 

4.  During  a   Period    of   Decline   foUozving    a 

Period  of  Prosperity 


172  BUSINESS  BAROMETERS 

a.  An  increase  forecasts  more  unsatisfac- 
tory conditions. 

b.  A  decrease  forecasts  higher  money  rates 
or  less  satisfactory  conditions. 

c.  No  change  suggests  caution.  ^ 

Reports  of  the  Comptroller  of  the  Currency 

Each  national  bank  is  required  to  make  five 
reports  a  year  to  the  Comptroller  of  the  Cur- 
rency. The  reports  are  verified  under  oath  by- 
the  president  and  cashier,  are  attested  by  at  least 
three  directors  of  the  bank,  and  give  in  detail, 
the  resources  and  liabilities  on  any  day  specified 
by  the  Comptroller.  When  the  Comptroller  calls 
for  a  report,  it  is  always  for  a  report  of  the 
condition  of  the  bank  on  a  date  preceding  the 
call.  The  report  must  be  mailed  to  the  Comp- 
troller within  five  days  after  the  request  is  made 
for  it.  Such  reports  are  the  basis  of  the  most  use- 
ful examinations  of  the  banking  situation,  as  they 
include  figures  from  all  national  banks  and  are 
annually  supplemented  with  figures  relative  to 
other  banks. 

In  addition  to  studying  these  figures  indepen- 
dently, they  should  be  studied  in  their  relation 
one  to  the  other.  In  other  words,  the  "ratios" 
should  be  studied  and  compared.  This  is  one 
of  the  principal  features  of  these  reports  as  used 


REPORTS  OF  THE  COMPTROLLER  173 

in  connection  with  the  study  of  "Fundamental 
Statistics."  They  will  be  found  more  fully  ex- 
plained under  the  headings  of  "Loans''  and 
"Cash." 

Loans  of  the  Banks 

In  analyzing  reports  of  the  Comptroller  of 
the  Currency,  four  distinct  lines  of  investigation 
are  followed,  namely: 

(a)  The    ratio   of   bank    "Loans"    to   bank 
"Resources." 

(b)  The  ratio  of  bank  "Loans  and  Invest- 
ments" to  bank  "Resources." 

(c)  The  ratio  of  "Cash"  in  the  banks  to  the 
"Deposits."     . 

(d)  The  ratio  of  the  "Cash"  in   the  banks 
to  the  "Resources." 

These  are  four  distinct  subjects  to  be  studied 
independently  before  making  any  deduction  or 
forecasting  business  conditions.  Yet  there  is  a 
close  relation  between  (a)  and  (b)  and  also  be- 
tween (c)  and  (d).  Therefore,  in  order  to  save 
both  time  and  space,  the  first  two  are  here  treat- 
ed together,  and  the  second  two  are  treated 
together  under  another  heading.  'h 

Bank  Loans :  Bank .  loans  include  notes,  dis- 
counts, overdrafts  and  all  other  forms  of  so- 
called  liquid  assets.    Banks  when  first  organized"' 


174  BUSINESS  BAROMETERS 

were  expected  to  serve  two  purposes:  they  were 
to  receive  money  on  deposit  and  to  loan  it  to 
depositors,  with  the  understanding  that  all  de- 
posits and  loans  could  be  withdrawn  or  called 
for  payment  at  any  time.  The  most  ideal  con- 
ditions for  banks  today  are  to  be  found  where 
business  is  kept  most  closely  to  the  standard 
thus  early  laid  down.  All  of  the  assets  of  a 
bank,  other  than  cash  on  hand,  etc.,  should  con- 
sist of  loans  that  can  be  liquidated  within  six 
months.  Therefore,  the  term  "Loans  and  Dis- 
counts" would  include  all  notes,  etc.,  which  are 
either  payable  on  demand  or  are  payable  within 
six  months  or  a  year  at  the  utmost.  / 

Investments:  In  reality,  a  bank  is  loaning 
money  to  a  corporation  whether  it  purchases  its 
fifty-year  Debenture  Bonds  or  its  six  months 
notes.  In  either  case  the  security  is  the  same 
and  the  interest  may  be  the  same.  For  an  inves- 
tor, the  fifty-year  bonds,  if  properly  secured, 
are  in  most  instances  a  more  practical  purchase 
than  the  note,  but  for  a  bank  the  same  state- 
ment cannot  be  made.  Strict  adherence  to  the 
original  principle  of  banking  often  demands  that 
a  bank  shall  refuse  to  purchase  the  bonds  of  a 
corporation  of  which  it  may  willingly  accept  the. 
notes. 


LOANS  OF  THE  BAXKS  175 

Notes  when  purchased  by  banks  may  be  listed 
under  the  head  of  "Loans  and  Discounts,"  but 
bonds  so  purchased  must  be  listed  under  the 
head  of  "Investments."  The  national  law  for- 
bids national  banks  to  purchase  improved  real 
estate,  or  real  estate  mortgages,  except  as  a 
building  site,  because  real  estate  cannot  be  read- 
ily sold,  even  although  in  many  cases,  it  is  the 
safest  form  of  investment.  Logically  there  seems 
to  be  no  reason  why  a  national  bank  should  be 
allowed  to  buy  fifty-year  bonds  and  forbidden  to 
purchase  improved  real  estate,  but  the  fact  that 
the  prohibition  is  made  shows  that  the  spirit  of 
the  law  is  against  all  forms  of  permanent  in- 
vestments. Therefore,  all  stocks,  iSonds  and 
notes,  which  do  not  mature  for  six  months  or 
more,  come  technically  under  the  head  of  "In- 
vestments." As  there  is  no  law  which  states 
exactly  the  difference  between  "Loans"  and  "In- 
vestments," banks  differ  regarding  the  definition 
and  many  banks  place  under  the  head  of  loans, 
short  time  notes  which  do  not  mature  for  two 
or  three  years, — although  technically  such  short- 
term  notes  should  come  under  the  head  of  "In- 
vestments." 

Resources:  The  "Resources"  of  a  bank  are  the 
same  as  the  resources  of  any  individual  or  na- 
tion.   They  include  the  notes,  discounts,  loans. 


176  BUSINESS  BAROMETERS 

stocks,  bonds,  real  estate  and  other  property 
which  the  bank  holds.  When  a  bank  makes  a 
total  appraisal  of  its  assets,  figured  on  a  conser- 
vative basis,  the  resulting  figure  represents  the 
"Resources."  The  greater  the  proportion  of 
"Loans"  to  "Resources,"  the  less  normal  are 
banking  conditions. 

We  think  that  the  above  definitions  in  them- 
selves are  sufficient  to  convince  the  reader  of 
the  truth  of  the  following  statement: 

(i)  The  hanking  situation  of  the  country 
becomes  more  critical  as  the  proportion  of  loans 
to  resources  increases,  and  is  imiproving  as  the 
proportion  of  loans  to  resources  decreases. 

If  all  national  banks  confined  themselves  to 
loans  and  discounts,  and  made  no  permanent 
investments,  excepting  to  the  extent  of  their 
capital,  it  would  be  a  very  easy  matter  to  judge 
the  conditions  in  accordance  with  the  above  rule. 
As,  however,  practically  all  banks  are  placing 
more  and  more  funds  into  pemianent  invest- 
ments, that  item  must  be  independently  analyzed 
and  the  above  rule  must  be  supplemented  by 
the  following: 

(2)  With  a  given  -fixed  ratio  of  loans  to  re- 
sources, conditions  become  more  critical  as  the 
proportion  of  investments  to  resources  increases 


LOANS  OF  THE  BANKS  177 

and  conditions  improve  as  the  proportion  of  in- 
vestments to  resources  decreases. 

In  other  words,  provided  a  constant  relation 
exists  between  the  funds  loaned  and  the  total 
resources,  the  general  banking  situation  is 
strengthened  whenever  a  bank  disposes  of  long 
term  bonds  and  reinvests  the  money  in  high 
grade  commercial  paper  and  the  general  bank- 
ing situation  is  weakened  whenever  a  bank  pur- 
chases long  term  bonds  with  money  received 
from  deposits  or  from  the  payment  of  high 
grade  commercial  paper.  Therefore,  anyone 
studying  these  conditions,  should  note  two 
things : 

(i)  Whether  the  proportion  of  ''Loans",  to 
"Resources"  is  increasing,  decreasing,  or  re- 
maining fixed. 

(2)  Whether  the  proportion  of  "Invest- 
ments" to  "Resources"  is  increasing,  decreas- 
ing, or  remaining  fixed. 

Although  the  most  careful  students  consider 
these  terms  separately,  we  think  it  is  generally 
safe  to  combine  the  two  ideas  in  the  one  general 
rule,  as  follows: 

As  the  ratio  of  ''Loans  and  Investments''  to 
''Aggregate  Resources''  increases,  the^  banking 
situation  becomes  more  critical ;  and  as  the  ratio  of 
the  two  combined  items  to  "Aggregate  Resources" 
decreases,  the  banking  situation  improves. 


178  BUSINESS  BAROMETERS 

The  accompanying  tables  show  the  record 
of  the  national  banks,  state  and  private  banks 
and  trust  companies  of  the  United  States  re- 
porting to  the  Comptroller  between  1865  and 
1909. 

A  study  of  the  accompanying  tables  in  con- 
nection with  the  other  subjects,  makes  it  possible 
to  forecast  every  period  of  depression  and  every 
period  of  prosperity  which  this  country  has  ex- 
perienced since  the  Civil  War.  These  fi.2:ures 
cannot  be  expected  to  foretell  the  exact  time 
when  crises  or  panics  will  occur,  owing  to  sud- 
den catastrophes  such  as  earthquakes,  wars,  as- 
sassinations, etc.,  but  they  invariably  forecast  the 
large  swings.  They  clearly  show  when  condi- 
tions are  becoming  abnormal  and  the  pendulum 
is  swinging  too  far  from  the  perpendicular. 
These  figures  date  back  only  to  the  Civil  War, 
as  the  system  of  national  banks  was  not  estab- 
lished until  1863.  Consequently  this  is  the  only 
period  which  gives  satisfactory  data  to  form  a 
basis  for  any  theory  regarding  the  relation  of 
banking  conditions  to  general  business,  and 
conversely,  the  eflFect  of  business  conditions  upon 
banking  conditions.  The  latter  clause  is  added, 
for  although  a  strained  condition  of  the  bank 
causes   a   recession   in   the   general   business,   it 


uate     panics  ^..««>.                                    -«,«.,„, 

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1868  2.  £V.pd 

1869  2,  Hf:   O^  M,; 

1870  2,  PI*  >;  '  ; 

1871  2,  88. 9d 

1872  3.  -^   '^'T 

1873  I. 

1874  I, 

1875  3.  ••■ 

1876  3. 

1877  3t! 

1878  3. 

1879  3r 

1880  3. 

1881  3.  "      . 

1882  3.  iJ8.dv 

1883  3.  U£V 

1884  4.  dp.YV. 

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1888  !ne^t^*6,i  =  ^:  118^. 

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1 891  8,< 

1892  9,;  T'^ 

1893  9.'  'V 

1894  9„  r.-    .,  .     ...  •>.. 

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LOANS  OF  THE  BANKS  179 

has  always  been  great  activity  in  business  that 
has  caused  critical  banking  conditions. 
■"  Therefore,  when  business  has  been  very  ac- 
tive and  the  country  very  prosperous,  bankers 
may  surely  anticipate  strained  and  critical  bank- 
ing conditions.  Conversely,  when  strained 
banking  conditions  have  existed  for  a  certain 
period,  business  men  may  be  sure  of  a  reaction. 
The  figures  show  that  after  a  period  during 
which  there  was  a  more  or  less  noticeably  rapid 
increase  in  the  ratio  of  "Loans  and  Investments" 
to  "Resources,"  there  followed  invariably  a  period 
of  depression  until  the  ratio  was  reduced  to  a 
normal  point.  From  1887  to  1897  the  "Loans 
and  Discounts"  increased  only  43%  and  the  "In- 
vestments" 73%  against  an  increase  in  aggregate 
resources  of  50%.  This  was  a  normal  and 
healthy  increase  and  all  observers  were  sure  that 
the  country  was  preparing  for  a  period  of 
marked  prosperity,  but  between  1897  a"d  19^7 
the  "Loans  and  Discounts"  increased  236%  and 
the  "Investments"  307%  against  the  increase  in 
"Resources"  of  248%.  It  was  due  to  these  fig- 
ures that  the  bankers  and  investors  who  care- 
fully study  all  Fundamental  Statistics  were  sure 
that  the  country  had  entered  a  period  of  decline. 
Such  figures  showed  a  period  of  depression  to 
be  absolutely  necessary  in  order  to  give  the  banks 


180  BUSINESS  BAROMETERS 

an  opportunity  to  recuperate  and  again  enjoy 
healthy  and  normal  conditions.  These  figures 
are  still  more  dangerous  when  it  is  considered 
that  during  the  period  between  1887  and  1897 
the  aggregate  "Resources"  showed  an  increase 
of  50%,  even  although  the  market  value  of  se- 
curities was  continually  decreasing.  During  the 
ten  years  between  1897  and  1907  this  increase 
in  aggregate  "Resources"  was  largely  due  to 
the  inflated  prices  and  the  growing  market  val- 
ue of  securities  held  and  possibly  not  at  all  to 
larger  numbers  of  investments.  These  changes, 
it  is  true,  have  been  irregular  rather  than  con- 
stant and  have  caused  varying  conditions  of 
strength  and  weakness  in  the  banking  situation, 
but  the  figures  plainly  indicate  that  in  1906 
banks  were  in  a  very  weak  condition  with  their 
investments  over-extended.  The  above  figures 
would  appear  somewhat  different  if  figures  of 
all  private  banking  houses,  such  as  J.  P.  Mor- 
gan &  Co.,  Kuhn,  Loeb  &  Co.,  and  others  were 
included,  but  nevertheless  they  are  sufficient. 

Referring  to  earlier  years,  we  see  that  in  1873 
the  ratio  of  "Loans"  to  "Resources"  first  ex- 
ceeded 50%  and  in  fact  reached  a  ratio  of  52.72%. 
Consequently  a  panic  occurred  in  that  year, 
although  the  ratio  of  "Loans"  to  "Resources" 
continued  to  increase  to  54.13%  and  54.55%  in 


LOANS  OF  THE  BANKS  181 

1874  and  1875  respectively,  and  the  prolonged 
depression  was  probably  due  to  this  continued 
increase.  Moreover,  this  item  remained  practi- 
cally unchanged  until  1879  when  the  liquida- 
tion was  completed.  ''Loans  and  Discounts" 
which  in  1873  were  $1,439,900,000  after  reach- 
ing $1,748,100,000  in  1875,  were  reduced  in 
1879  to  $1,507,400,000.  This  condition  of  the 
banks  enabled  them  to  loan  money  at  low  rates 
of  interest  and  again  accommodate  legitimate 
enterprises.  Consequently,  business  increased 
marvellously  from   1879  to  1883. 

During  this  period,  however,  loans  had  again 
rapidly  advanced, — as  is  shown  by  the  table, — 
and  remained  practically  fixed  between  1883  and 
1885.  During  this  period,  that  is  in  1884,  a 
sharp  panic  occurred  which  might  readily  have 
been  anticipated.  Although  short  in  comparison 
with  the  crisis  of  1873,  distress  was  felt  in  every 
part  of  the  United  States.  However,  the  banks 
were  able  to  reduce  quickly  their  ratio  of  "Loans 
and  Investments"  to  "Resources"  so  that  the  ra- 
tio which  stood  at  77.96  in  1884  was  reduced  to 
72.83  in  1885.  Consequently,  business  became 
again  more  active,  mills  resumed  operation  and 
railroad  earnings  began  to  increase. 

In  1886  the  new  period  of  prosperity,  with 
advancing  prices,  was  in  full  swing.    This  move- 


182  BUSINJESS  BAROMETERS 

ment  continued  without  any  marked  change 
until  the  early  'nineties  when  "Loans"  reached 
a  very  high  proportion,  60.57%.  Large  crops 
in  this  country,  with  small  crops  abroad,  helped 
to  postpone  trouble  for  a  time,  but  a  depression 
came  in  1893  when  the  ratio  of  ''Loans"  to  "Re- 
sources was  even  higher  than  in  1890,  namely 
60.7470.  All  business  men  and  investors  who 
were  studying  these  figures  were  absolutely  sure 
that  a  panic  would  ensue. 

Another  disturbance  came  in  1903  which, 
although  short,  was  certainly  severe.  Railroad 
earnings  decreased,  mills  shut  down,  many  men 
were  thrown  out  of  employment  and  money 
rates  were  very  high.  Again  the  western  farm- 
er came  to  the  rescue  of  the  country  and,  owing 
to  bountiful  crops  and  strong  underlying  condi- 
tions, mills  again  started  and  business  improved. 
This  continued  until  1907.  During  these  years, 
how^ever,  there  was  no  real  improvement  in  the 
banking  situation  except  for  a  short  time.  In 
1904  money  was  very  cheap,  but  only  temporar- 
ily. The  banking  conditions  became  worse  and 
worse  so  that  students  of  the  situation  were 
sure  that  the  improvement  in  1904  to  1907  would 
be  followed  by  a  depression,  but  during  which 
time  the  banks  might  again  have  an  opportunity 
to  recuperate. 


LOANS  OF  THE  BANKS  183 

The  great  value  of  this  data  to  the  investor  is 
self-evident.  When  the  ratio  of  "Loans  and 
Investments"  to  "Resources"  is  abnormally  high, 
the  country  is  abounding  in  prosperity  and  se- 
curities are  selling  at  high  prices,  the  wise  in- 
vestor sells  his  securities  and  places  his  money 
on  deposit  in  strong  banks.  On  the  other  hand, 
when  the  ratio  of  "Loans  and  Investments"  to 
"Resources"  is  low,  and  when,  although  busi- 
ness is  dull  and  mills  are  not  running,  his  gen- 
eral knowledge  of  the  situation  shows  that  con- 
ditions are  sound  and  healthy,  the  investor  will 
withdraw  his  money  from  the  banks,  pur- 
chase high  grade  stocks  and  bonds  and  hold 
them  until  business  again  becomes  active. 

Moreover,  while  in  the  tables  we  have  given, 
aggregate  figures  for  all  banks,  compiled  in  order 
to  show  general  banking  conditions,  they  are  of 
service  in  comparing  the  condition  of  two  or 
more  banks.  Every  depositor  should  select  a 
bank  whose  ratio  of  "Loans"  to  "Resources"  is 
comparatively  small  and  should  especially  avoid 
banks  with  large  "Investment"  accounts, — so 
large  as  to  show  a  policy  not  in  agreement  with 
sound  management. 

In  the  weekly  New  York  Bank  Statement, 
the  meaning  of  "Loans"  is  self-evident.  A  very 
small   figure   for   "Loans"   is   not  a  good  sign, 


184  BUSINESS  BAROMETERS 

neither  is  a  very  large  figure.  The  former  signi- 
fies stagnation,  the  latter,  over-extension.  It 
is  important  that  the  figure  be  normal,  and  that 
it  bear  a  proper  relation  to  the  figure  for  "De- 
posits,"— thus  giving  a  sound,  safe  amount  for 
"Surplus  Reserve." 

The  following  conclusions  regarding  the  ratio 
of  "Loans''  to  "'Aggregate  Resources"  are  sug- 
gested. The  same  principles  apply  to  the  ratio 
of  "Loans  and  Investments"  to  Aggregate  Re- 
sources." 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  in  the  ratio  signifies  re- 
newed activity. 

(b)  A  decrease  signifies  a  further  recession 
in  business. 

(c)  No  change  signifies  continued  dullness- 

2.  During  a  Period  of  Improvement  following 

a  Period  of  Business  Depression 

(a)  An  increase  in  the  ratio  signifies  in- 
creased activity. 

(b)  A  decrease  signifies  a  temporary  reces- 
sion. 

(c)  No  change  calls  for  special  watchfulness. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase,  in  the  ratio  signifies  un- 
derlying troubles  and  forecasts  a  change  in  con- 
ditions. 


CASH  IN  THE  BANKS  185 

(b)  A  decrease  tends  to  prolong  the  period 
of  prosperity. 

(c)  No  change  also  tends  to  prolong  this 
period. 

4.    During  a  Period  of  Decline  following  a  Per- 
iod of  Prosperity 

(a)  An  increase  in  the  ratio  signifies  further 
trouble. 

(b)  A  decrease  tends  to  delay  bad  condi- 
tions. 

(c)  No  change  calls  for  special  watchful- 
ness. 

Gash  in  the  Banks 

This  subject  may  be  considered  in  two  ways: 

(c)  Ratio  of  the  "Cash"  in  the  banks  to  the 
"Deposits.". 

(d)  Ratio  of  the  "Cash"  in  the  banks  to'  the 
"Resources." 

In  reality  these  are  two  entirely  different 
subjects,  as  the  "Deposits"  of  a  bank  are  liabil- 
ities while  its  "Resources"  are  assets.  Therefore, 
in  the  one  case  we  consider  the  ratio  of  "Cash" 
to  liabilities;  in  the  other,  the  relation  of  "Cash" 
to  the  assets.  It  is  therefore  absolutely  neces- 
sary for  the  student  of  "Fundamental  Statistics" 
to  examine  thoroughly  the  condition  of  the 
banks  in  relation  to  both  points.  It  has  hap- 
pened during  the  past  forty  years  that  the  ratio 


186  BUSINESS  BAROMETTERS 

of  ''Cash"  to  "Resources"  has  varied  almost 
constantly  with  the  ratio  of  ''Cash"  to  "Depos- 
its," but  before  considering  the  two  subjects 
together,  one  should  first  note  if  their  progress 
is  still  along  parallel  lines. 

Having  already  explained  the  relation  that 
"Loans  and  Investments"  bear  to  the  money  sit- 
uation, let  us  study  the  effect  that  "Cash"  has  on 
the  money  situation.  Of  course  it  is  usually  true 
that  the  greater  the  amount  of  "Loans  and  In- 
vestments," the  smaller  the  amount  of  "Cash," 
and  vice  versa.  For  this  reason  the  following 
rules  are  already  self-evident. 

I.  The  banking  situation  grozvs  more  critical 
as  the  ratio  of  cash  to  deposits  decreases,  and 
the  situation  improves  as  the  ratio  of  cash  to 
deposits  increases. 

National  banks  are  compelled  by  law  to  main- 
tain an  actual  reserve  equal  to  twenty-five  per 
cent  of  their  deposits  and  any  amount  over  this 
reserve  is  called  the  "Surplus  Reserve."  As 
this  "surplus  reserve"  declines,  money  rates  in- 
crease, merchants  and  manufacturers  are  limited 
in  borrowing,  and  speculators  are  compelled  to 
dispose  of  stocks  and  bonds  in  order  to  pay 
their  loans.  On  the  contrary,  as  the  "surplus  re- 
serve" decreases,  the  banks  are  in  a  much  bet- 
ter condition  and  are  ready  to  loan  money  to 


CASH  IN  THE  BANKS  187 

investors,  manufacturers  and  merchants  at  low- 
er rates  of  interest.  All  of  this,  however,  is 
explained  in  detail  in  an  article  on  the  New 
York  Bank  Statements  a  few  pages  hence. 

Periods  of  depression  and  periods  of  prosper- 
ity in  the  past  always  could  have  been  antici- 
pated by  including  in  every  survey  of  passing 
conditions,  a  study  of  the  ratio  of  "Cash"  to 
'"Deposits."  Whenever  there  has  been  a  decline 
in  the  ratio  of  cash  to  deposits  or  aggregate  re- 
sources, there  has  always  followed  a  period  of 
contraction  of  credits;  and  conversely  as  this 
ratio  increased,  lower  interest  rates  have  always 
followed.  The  following  table  shows  the  ratio 
of  cash  to  the  deposits  of  the  National,  State, 
Savings  and  other  banks  and  trust  companies 
from  1865  to  and  including  June  30,  1908. 

THE  RATIO  OF  CASH  TO  NET  DEPOSITS  IN 
NATIONAL  BANKS. 


Ratio  of 

Year  No.  of  banks 

Individual 

Total  cash  in 

cash  to 

Reporting 

Deposits. 

Banks. 

Individual 
deposits 

1865 

1,960 

$641,000,000 

$199,400,000 

31. II 

1866 

2,267 

815,800,000 

231,900,000 

28.30 

1867 

2,279 

876,600,000 

205,600,000 

23 -45 

1868 

2,293 

968,600,000 

200,700,000 

20.72 

1869 

2,354 

1,032,000,000 

162,500,000 

15 -74 

1870 

2,457 

1,051,300,000 

187,700,000 

17-85 

188 


BUSINESS   BAROMETERS 


I87I 

2,796 

1,251,600,000 

194,000,000 

15-5 

1872 

3,066 

1.353,800,000 

177,600,000 

1312 

1873 

1,968 

1,421,200,000 

218,200,000  . 

'   15-35 

1874 

1.983 

1,526,500,000 

252,200,000 

16.52 

1875 

3.336 

1,787,000,000 

238,700,000 

13.36 

1876 

3.448 

1,778,600,000 

226,400,000 

12.73 

1877 

3.384 

1,813,600,000 

230,500,000 

12.71 

1878 

3.229 

1,717,400,000 

214,600,000 

12.50 

1879 

3.335 

1,694,200,000 

216,300,000 

12.77 

1880 

3.355 

1,951,600,000 

285,500,000 

1463 

I88I 

3.427 

2,296,800,000 

295,000,000 

12.84 

1882 

3.572 

2,460,100,000 

287,100,000 

11.65 

1883 

3.835 

2,568,400,000 

321,000,000 

12.50 

1884 

4,111 

2,566,400,000 

321,200,000 

12.51 

1885 

4.350 

2,734,300,000 

414,300,000 

1515 

1886 

4,378 

2,812,000,000 

375,500,000 

13.00 

1887 

6.179 

3,308,200,000 

432,800,000 

13.09 

1888 

6,647 

3,422,700,000 

446,100,000 

13  03 

1889 

7.203 

3,778,100,000 

499,100,000 

13.21 

1890 

7.999 

4,062,500,000 

478,300,000 

11.77 

I89I 

8,641 

4,796,800,000 

479,100,000 

II. 41 

1892 

9.338 

4,664,900,000 

568,400,000 

12.58 

1893 

9.492 

4,627,300,000 

515,900,000 

II. 15 

1894 

9,508 

4,651,200,000 

688,900,000 

14.81 

1895 

9,818 

4,921,300,000 

631,100,000 

12.82 

1896 

9.469 

4,945,100,000 

531,800,000 

10.84 

1897 

9,457 

5,094,700,000 

628,200,000 

12.33 

1898 

9.485 

5,688,200,000 

687,800,000 

12.09 

1899 

9.732 

6,768,700,000 

723,300,000 

10.69 

1900 

10,382 

7,238,900,000 

749,900,000 

10.36 

I90I 

11,406 

8,460,600,000 

807,500,000 

9-54 

1902 

12,424 

9,104,700,000 

848,100,000 

9.31 

1903 

13.684 

9,553,600.000 

857,200,000 

8.97 

CASH  IN  THE  BANKS  189 


1904 

14,850 

10,000,500,000 

990,600,000 

9.90 

1905 

16,410 

ii»350,7oo,ooo 

994,100,000 

8.76 

1906 

17.905 

12,215,800,000 

1,016,400,000 

8.32 

1907 

19,746 

13,099,600,000 

1,113,700,000 

8.51 

1908 

21,346 

12,584,511.169 

1,368,300,000 

10.70 

It  is  very  interesting  to  note  that  the  ratio 
of  "Cash"  to  "Deposits"  decreased  in  1891  to 
practically  the  lowest  figure  known  up  to  that 
time  and  in  1893  to  a  still  smaller  figure,  mak- 
ing the  panic  of  1893.  As  in  the  case  of  all  pan- 
ics, this  resulted  in  the  calling  of  loans  and  the 
immediate  strengthening  by  the  banks  of  their 
cash  resources,  so  that  in  1894  this  ratio  had  in- 
creased more  than  32%.  In  the  following 
year  the  ratio  again  dropped  13%.  From  1897 
it  continued  to  fall  until  the  next  very  low  point 
reported  for  the  year  ending  June  30,  1903.  At 
that  time,  experts  in  these  matters  publicly  pro- 
phesied a  panic  followed  by  a  period  of  de- 
pression and,  true  enough,  the  following  year 
it  came, — the  panic  of  1903.  "Resources"  in 
1904  were  strengthened  somewhat,  but  the  im- 
provement was  not  enough  to  restore  the  banks 
to  a  healthy  and  normal  condition.  In  fact,  the 
ratio  was  very  low  from  1904  to  1907,  so  that, 
instead  of  the  customary  number  of  years  of 
prosperity  before  another  depression,  the  coun- 
try saw  a  change  for  the  worse  in  1907.  If  the 
depression  of  1903  had  lasted  long  enough  to 


190  BUSINESS  BAROMETERS 

enable  the  banks  sufficiently  to  increase  their 
cash  resources,  improvement  would  probably 
have  gone  on  until  1912  or  1913;  but  as  the 
banks  did  not  have  time  to  recuperate,  another 
depression  within  a  few  years  was  inevitable. 
The  figures  in  this  table  are  for  the  entire  coun- 
try, and  a  study  of  them  is  very  suggestive.  As 
they  in  general  are  similar  to  those  outlined  in 
the  paragraphs  on  ''Loans,"  they  need  not  be  de- 
scribed further  here.  When  studying  the  ratio 
of  "Cash"  to  "Deposits,"  one  must  not  only  note 
this  ratio,  but  must  also  keep  in  mind  the  aggre- 
gate of  cash  and  the  aggregate  of  deposits 

The  following  conclusions  relative  to  the  ra- 
tio of  "Cash"  to  "Deposits"  are  suggested: 

(These  general  principles  also  apply  to 
the  ratio  of  ''Cash"  to  "Aggregate  Resources.") 
I.     During  a  Period  of  Business  Depression. 

(a)  After  money  has  been  cheap  for  some 
time,  accompanied  by  large  cash  figures,  a  con- 
tinued increase  in  the  ratio  of  "Cash"  to  "De- 
posits" signifies  that  business  remains  at  a 
standstill. 

(b)  A  decrease — under  the  above  conditions 
—may  be  a  good  sif;n,  showing  that  business  is 
reviving. 

(c)  No  change  signifies  that  conditions  are 
stationary. 


CASH  IX  THE  BANKS  191 

2.  During  a  Period  of  Improvement  following 

a  Period  of  Business  Depression. 

(a)  After  money  rates  have  been  very  low 
for  sometime,  a  further  increase  in  the  ratio  of 
"Cash"  to  "Deposits"  often  means  that  there 
has  been  a  recession  in  business. 

(b)  A  decrease  under  such  conditions  usually 
signifies  renewed  activity. 

(c)  No  change  signifies  a  period  of  hesita- 
tion. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  in  the  ratio  of  "Cash"  to 
"Deposits"  tends  to  prolong  the  period  of  pros- 
perity. 

(b)  A  decrease  tends  to  shorten  the  period 
of  prosperity. 

(c)  No  change  signifies  a  period  of  hesita- 
tion. 

4.  During  a  Period  of  Decline  follozving  a  Per- 

iod of  Prosperity. 

(a)  An  increase  in  the  ratio  of  "Cash"  tends 
to  delay  the  depression. 

(b)  A  decrease  hastens  the  period  of  tight 
money  and  unsatisfactory  conditions. 

(c)  No  change  signifies  nothing  of  import- 
ance. 

Deposits  of  the  Banks 
The   rule  governing  the   ratio   of  "Cash"   to 
"Deposits"  holds  good,  except  when  deposits  are 


192  BUSINESS  BAROMETERS 

increasing  too  rapidly,  owing  to  increased  prices 
of  securities,  real  estate  and  commodities.  Be- 
side studying  the  ratio  as  we  have  described, 
the  deposits  should  be  watched  especially  for  in- 
creases. The  weekly  statement  of  the  New  York 
banks  will  serve  this  purpose,  although  the  fact 
that  the  reserve  exceeds  the  deposits  is  not  suf- 
ficient for  safety.  Deposits  should  not  increase 
too  rapidly. 

A  very  simple  illustration  shows  how  large  de- 
posits may  be  reported  at  considerable  risk,  but 
without  any  intentional  mis-statements  of  facts. 

A  few  years  ago  a  miser  died  in  a  certain 
town  which  may  be  called  Graniteville.  The 
executor  of  his  estate  found  $5,000  in  gold  stored 
away  in  the  house,  and  deposited  it  with  the 
Graniteville  Trust  Company,  thereby  increasing 
the  deposits  of  that  company  by  $5,000.  Shortly 
after,  John  Smith  borrows  $4,500  of  the  amount 
in  order  to  buy  stone  with  which  to  build 
a  block  of  buildings.  The  local  granite  company, 
having  outside  income  sufficient  to  pay  its  ex- 
penses, deposited  the  entire  $4,500  received  from 
Smith  with  the  Graniteville  Trust  Company,  so 
the  deposits  of  the  trust  company  became  $9,500. 
Soon  after  Mr.  Jones  came  into  the  bank  and 
borrowed  $4,200  with  which  to  buy  stone  to 
Build  a  block  in  another  part  of  the  town,  and 


DEPOSITS  OF  THE  BANKS  193 

Upon  receipt  of  Jones'  $4,2CX),  the  granite  com- 
pany made  another  deposit  with  the  trust  com- 
pany increasing  the  deposits  to  $13,700. 

The  following  day  a  Mr.  Brown,  by  means  of 
a  loan  from  the  bank  bought  stone,  and  the 
granite  company  increased  its  deposits  to  $17,- 
500.  This  same  method  of  procedure  was  fol- 
lowed further  until  the  $5,000  in  gold  which 
was  originally  deposited  resulted  in  increasing 
the  deposits  of  the  trust  company  by  $50,000 
and  the  loans  by  $45,000.  Moreover,  this  $5,000 
enabled  the  granite  company  to  suppose  it  had 
$45,000  in  cash  on  deposit  in  the  bank  and  also 
provided  for  the  building  of  several  stone  blocks 
in  the  city.  In  other  words,  the  deposit  of  this 
$5,000  in  gold  resulted  in  creating  an  apparent 
wealth  in  Graniteville  of  over  $100,000.  This 
story  also  shows  the  great  importance  of  import- 
ing gold  and  of  giving  the  banks  the  use  of  as 
much  actual  currency  as  possible. 

When  the  miser's  estate  was  settled,  this 
$5,000  was  turned  over  to  his  only  daughter, 
who  had  the  same  hoarding  disposition  as  her 
father.  She  immediately  withdrew  the  $5,000 
from  the  Graniteville  Trust  Company  and  placed 
the  same  in  a  safe-deposit  box  with  the  follow- 
ing result. 

The  Graniteville  Trust  Company,  in  order  to 
show  its  proper  Surplus  Reserve  was  obliged  to 


194  BUSINESS  BAROMETERS 

demand  payment  of  all  the  loans  made  to  Smith, 
Jones,  Brown,  and  the  other  men-  In  order  to 
pay  these  loans,  all  of  these  men  were  obliged 
to  sell  the  buildings  which  they  had  erected  and, 
in  order  to  protect  the  price  of  granite,  the 
granite  company  was  obliged  to  purchase  these 
buildings,  which  necessitated  the  withdrawal  of 
their  deposits  from  the  trust  company.  Thus 
the  withdrawal  of  this  $5,000  in  gold  resulted 
in  decreasing  the  deposits  of  said  trust  company 
$50,000,  in  causing  the  $45,000  of  cash  assets  of 
the  granite  company  to  vanish,  and  in  causing 
the  half  dozen  or  more  citizens  to  lose  their 
property,  and  possibly  enter  bankruptcy. 

The  principle  should  be  clearly  kept  in  mind 
when  studying  the  "Deposit"  item  of  the  New 
York  Bank  Statement.  Large  "Deposits"  are 
not  necessarily  a  healthy  sign.  Neither  very 
large  or  very  small  "Deposits"  are  normal.  The 
best  bank  statement  is  the  one  where  the  figures 
for  "Deposits"  are  nonnal,  and  bear  a  proper 
relation  to  "Loans,"  thus  showing  a  proper 
"Surplus  Reserve." 

The  exact  meaning  of  these  various  terms  as 
used  in  the  above-mentioned  Bank  Statement 
(which  is  issued  every  Saturday  at  eleven  in 
the  morning,  showing  the  condition  at  the  close 
of  business  on  Friday)  is  as  follows,  according 


DEPOSITS  OF  THE  BANKS  195 

to  a  valuable  pamphlet  published  by  Sig.   Ro- 
senblatt &  Co: 
^^ Loans  and  Discounts: 

Comprising    loans,    discounts,    stocks,    bonds 
and  mortgages  owned  by  the  bank- 
Specie : 

Comprising    gold    and    silver    coin.    United 
States    and    Clearing    House    certificates,    and 
United  States  silver  certificates. 
Legal  Tender  Notes : 

Comprising  United  States  legal  tender  notes 
of  all  issues. 
Circulation : 

The  amount  outstanding. 
Deposits : 

Gross  deposits  and  unpaid  dividends  less  ex- 
changes for  the  clearing  house,  amounts  due 
from  other  banks  for  collection,  notes  of  other 
banks  and  checks  on  non-clearing  institutions 
in  the  city  of  New  York. 

The  item  of  loans  and  discounts,  it  will  be  no- 
ticed, represents,  aside  from  notes,  drafts  or  any 
instrument  upon  which  funds  have  been  loaned 
out  by  the  bank,  also  United  States  bonds  held 
by  the  national  bank  as  security  for  circulation 
and  for  deposits  of  public  money,  and  the  stocks, 
bonds,  mortgages,  and  syndicate  investments  of 
both  state  and  national  banks.  Therefore, 
changes   in  circulation  may   very  often   appear 


196  BUSINESS  BAROMETERS 

also  as  a  change  in  loans,  since  purchases  by  the 
banks  of  bonds  always  increase  the  loans,  and 
sales  of  bonds  decrease  the  loan  account,  if  the 
proceeds  are  not  loaned  out. 

It  must  be  kept  clearly  in  mind  that  all  items 
of  the  weekly  statement  are  made  up  by  aver- 
ages. There  are  two  ways  to  make  up  these  av- 
erages, but  neither  one  gives  a  clear  picture  of 
the  condition  of  the  bank:  one  way  is  to  add 
the  figures  at  the  close  of  each  day's  business 
and  divide  the  total  by  the  number  of  business 
days  in  the  week.  Another  way  is  to  multiply 
each  of  the  first  day's  items  by  the  number  of 
business  days  in  the  week,  and  each  subsequent 
day's  items  by  one  less,  and  then  add  them  and 
divide  the  total  by  21  for  a  six-day  week  and  by 
15  for  a  five-day  week.  As  both  of  these  ways 
are  more  or  less  inaccurate,  the  changes  shown 
by  the  bank  statement  seldom  agree  with  the 
changes  indicated  by  the  reported  movement  of 
money. 

The  surplus  against  all  deposits  is  computed 
by  subtracting  one-quarter  of  the  net  deposits 
from  the  cash  held.  This  has  to  be  done,  as  the 
banks  are  required  by  law  to  keep  a  reserve  of 
25%  against  their  deposits.  This  is  true  so  far 
as  it  concerns  the  total  surplus.  The  surplus 
against   deposits   other   than   the  United   States 


DEPOSITS  OF  THE  BANKS  197 

deposits  is  computed  by  deducting  from  a  quar- 
ter of  the  total  deposits  25%  of  the  UnitedStates 
deposits  and  subtracting  the  remainder  from  the 
cash  held. 
As  an  example,  take  the  New  York  Clearing 
House  Statement  for  the  week  ending  Friday, 
February  15,  1908,  48  banks  reporting: 
Total  capital  of  all  institutions. . .  .$    124,350,000 

Net  profits  of  all  institutions 159,561,100 

Loans  average 1,135,248,200 

Specie  average   253,424,200 

Legal  tender  average 60,503,300 

*Deposits   average    1,132,309,100 

Circulation    average    .  . ; 66,723,500 

''•'L^nited  States  deposits  includ- 
ed       $59495.300 

Li  order  to  find  out  the  sur- 
plus reserve  against  all  deposits, 
compute    on    the    net    deposits 

amounting   to    $1,132,309,100 

25%,  equal  to 283,077,275 

The  actual   reserve,   consisting  of 
legal  tenders  and  specie  as  above 

amounts   to    $313,927,500 

Less  the   reserve  required 283,077,275 

Leaving  a  surplus  of 30,850,225 

To  find  the  surplus  against  de- 
posits other  than  United  States 


198  BUSINESS  BAROMETERS 

deposits,  take  the  total  deposits 

of $1,132,309,100 

Deduct  U.  S.  deposits  of 59495,300 

Leaving  net  deposits  of [,072,813,800 

25%   reserve   required 268,203,450 

Reserve   held    313,927,500 

Surplus    $    45,724,050 

Percentage  of  reserve  held  by  banks  was 
27.72%  (25%  required,  and  surplus  above  that 
amounting  to  $45,724,050). 

The  above  shows  how  the  bank  statement  ap- 
peared formerly.  The  question  immediately 
arises  whether  the  statemicnt  issued  by  the  banks 
comprising  the  clearing  house,  together  with  the 
non-members  statement,  would  give  an  actual 
picture  of  the  banking  power  of  New  York  City. 
The  answer  is  no,  inasmuch  as  the  trust  com- 
panies are  not  included  in  the  statement.  How- 
ever, it  is  now  possible  to  acquire  a  comprehen- 
sive knowledge  of  banking  conditions  in  Greater 
New  York  because  of  the  publication  of  the  ac- 
tual as  well  as  the  average  condition  of  the  Clear- 
ing House  banks,  and  the  compilation  under  di- 
rection of  the  State  Superintendent  of  Banks  of 
the  average  institutions  under  his  control,  not 
reporting  to  the  Clearing  House.  These  state- 
ments are: 

1st.     Clearing    House    members      average 
statement. 


DEPOSITS  OF  THE  BANKS  199 

2nd.  Clearing  House  members  actual 
statement. 

3rd.  Average  of  other  banks  and  trust  com- 
panies not  in  the  Clearing  House. 

4th.     Aggregate  average. 

In  order  to  make  the  compilation  still  clearer, 
the  Superintendent  issues  a  separate  summary  of 
weekly  statements  of  all  state  banks  and  trust 
companies. 

It  must  be  borne  in  mind  that  the  percentage 
of  reserve  of  Clearing  House  banks  represents 
actual  cash  in  bank,  while  cfnly  5%  of  cash  is  re- 
quired of  trust  companies,  the  remainder  being 
either  certain  bonds,  or  deposits  in  other  insti- 
tutions. 

In  spite  of  there  still  being  some  weak  points 
in  the  compilation  of  the  statement,  as,  for  in- 
stance, that  the  averages  are  not  figured  in  the 
same  way  by  all  institutions,  and  also  that  in  the 
item  ''Loans  and  Discounts"  there  are  included 
investments,  such  as  stocks,  bontls  and  mort- 
gages which,  in  fact,  should  not  be  included  in 
the  loan  item,  we  may  be  very  well  satisfied 
with  the  statement  as  now  issued.  It  is  highly 
to  be  appreciated  that  our  banks  and  trust  com- 
panies have  so  readily  acceeded  to  the  demands 
of  the  public." 

The  following  conclusions  relative  to  Bank 
Deposits  are  suggested: 


200  BUSINESS  BAROMETERS 

1.  During  a  Period  of  Business  Depression. 

(a)  An    increase   signifies    that    business    is 
improving. 

(b)  A  decrease  signifies  that  business  is  not 
improving. 

(c)  No  change  signifies  continued  dullness. 

2.  During  a  Period  of  Improvement  Following 

a  Period  of  Business  Depression 

(a)  An  increase  signifies  renewed  activity. 

(b)  A    decrease    signifies    a    temporary    re- 
cession. 

(c)  No  change  signifies  "uncertainty." 

3.  During  a  Period  of  Prosperity. 

(a)  A   large   increase   signifies   that   under- 
lying conditions  are  becoming  unsound. 

(b)  A  decrease  calls  for  caution. 

(c)  No  change   signifies   no   change   in  the 
situation. 

4.  During  a  Period  of  Decline  follozving  a  Per- 

iod of  Prosperity 

(a)  An  increase  tends  to  prolong  the  period 
of  prosperity. 

(b)  A  decrease  tends  to  hasten  the  coming 
period  of  depression. 

(c)  No  change  calls  for  special  watchful- 
ness. 

Surplus  Reserves  of  the  Banks 
The  figure  for  "Surplus  Reserve"  as  given  in 
the  New  York  Bank  Statement  always  indicates : 


SURPLUS    RESERVES    OF   THE    BANKS    201 

(a)  The  Price  of  Money. 

(b)  The  Supply  of  Money. 

The  price  is  determined  by  the  relation  of  the 
supply  and  the  demand ;  that  is,  when  more  per- 
sons wish  to  borrow  than  to  loan,  the  interest- 
rates  advance ;  and  when  a  larger  number  wish 
to  loan  than  to  borrow,  the  supply  is  greater 
than  the  demand  and  the  interest-rates  decline. 
For  this  reason  money-rates  are  usually  high 
during  the  periods  of  business  activity  and  low 
during  periods  of  depression.  The  price  of  mon- 
ey, however,  is  not  as  important  a  factor  as  the 
supply.  In  other  words,  provided  the  merchant 
can  obtain  the  money  when  needed  and  in  suffi- 
cient quantities,  an  abnormal  interest-rate  is  less 
harmful  in  its  effects  than  the  inability  to  get 
money  at  all. 

A  variation  in  the  rates  for  borrowed  money 
has  a  more  direct  effect  upon  the  market  for 
stocks  and  bonds  than  upon  the  market  for  mer- 
chandise. When  the  speculator  can  borrow  mon- 
ey at  three  or  four  per  cent,  to  purchase  securi- 
ties paying  five  or  six  per  cent.,  the  temptation 
is  to  borrow  and  make  the  purchases,  thus  in- 
creasing the  demand  and  consequently  the  mar- 
ket price  for  the  securities.  Under  such  cir- 
cumstances, there  is  a  profit  on  the  "interest  ac- 
count,"  even  although   there   is   no   increase   in 


202  BUSINESS  BAKOMSTTEIRS 

the  value  of  the  investments.  On  the  other  hand, 
this  increased  incentive  to  purchase  does  not  exist 
when  money  commands  six  or  seven  per  cent, 
and  securities  are  selling  on  a  four  or  five  per 
cent,  basis,  for  then  the  "interest  account"  shows 
a  loss.  Those  who  have  securities  upon  which 
they  are  borrowing  money  are  tempted  to  sell 
them  in  order  to  stop  the  loss  in  interest.  Con- 
sequently, the  supply  of  securities  exceeds  the 
demand  and  the  price  declines.  As  already  stat- 
ed above,  this  question  of  ''interest  rates"  is 
entirely  secondary  to  the  question  of  ''supply." 
It  is  not  interest  rates  that  cause  the  merchant 
to  fail  or  the  speculator  to  sacrifice  his  stocks, 
but  rather  the  inability  of  either  to  renew  loans 
on  any  terms  w^hatever.  Many  great  periods 
of  declining  prices  have  been  solely  due  to  this 
cause,  namely,  a  lack  of  supply  of  money,  and 
the  speculator  is  not  the  only  one  to  feel  the 
effect  of  such  times. 

The  New  York  Bank  Statement,  used  in  con- 
nectioR  with  the  Comptroller's  Reports  and  For- 
eign Money  Rates,  forms  the  best  barometer  of 
the  supply  of  money.  As  to  the  current  price  of 
money,  this  may  be  definitely  determined  each 
da)^  by  referring  to  the  money  articles  on  the 
financial  pages  of  any  daily  paper.  The  figures 
under  what  is  known  as  "call   rates"  or  "call 


SURPLUS   RESERVES  OF   THE   BANKS        203 

money"  denote  the  rates  which  the  stock  ex- 
change houses  and  bond  dealers  are  required  to 
pay  for  money  on  loans  which  may  be  called 
any  day  and  on  which  the  rates  change  from 
day  to  day.  Sometimes  this  figure  is  more  and 
sometimes  less  than  the  figure  for  "time-rates." 
"Time-rates"  apply  to  loans  maturing  at  a  fixed 
date,  such  as  six  months  or  a  year.  When  the 
bankers  loaning  money  think  that  all  rates  are 
to  strengthen  in  the  near  future,  then  the  call- 
rate  is  less  than  the  time-rate,  and  when  the 
bankers  having  money  to  loan  think  that  all 
rates  are  to  decrease  in  the  immediate  future, 
then  call-rates  are  higher  than  the  time-rates. 
Some  of  the  shrewdest  borrowers  take  time 
money  when  the  bankers  are  encouraging  the 
people  to  take  call  money,  and  vice  versa,  on*  the 
principle  that  the  bankers  know  more  about  the 
situation  than  their  customers.  However,  this 
question  of  money  rates  is  too  complicated  to 
present  here  in  detail,  but,  as  has  been  stated, 
the  price  of  money  can  be  easily  ascertained  at 
any  moment  by  referring  to  the  daily  papers. 

The  supply  of  money  is  the  most  vital  ques- 
tion as — unlike  the  price — it  is  not  so  subject  to 
manipulation.  This  supply — as  above  stated — 
is  best  indicated  by  the  weekly  bank  statement. 
This  is  simply  a  statement  of  the  New  York 


204  BUSINESS  BAROMETERS 

banks  and  does  not  include  statements  from  any 
of  the  other  twenty  thousand  banks  in  the  United 
States,  nor  the  great  banking  institutions  of 
foreign  countries.  The  need  of  a  complete 
weekly  bank  statement  is  already  felt.  The  New 
York  bank  statement  is  already  being  made  to 
include  certain  outside  banks,  and  without  doubt 
the  time  is  coming  when  all  of  the  large  banks 
in  this  country  will  report  their  condition  by 
telegraph  every  Saturday  morning,  so  as  to  give 
a  combined  statement.  This  probably  will  later 
be  followed  by  the  banks  of  every  country  re- 
porting their  conditions  by  cable  to  London. 
This  will  give  a  bank  statement  which  will 
show  the  exact  financial  situation  and  enable 
one  to  note  the  amount  of  available  money  as 
quickly  and  as  certainly  as  he  may  now  note 
the  rate  of  interest.  Until  such  a  time  comes, 
however,  the  New  York  bank  statement,  issued 
every  Saturday  noon,  is  the  best  barometer  we 
have  for  judging  the  conditions. 

In  reading  the  bank  statement  the  main  point 
to  note  is  the  amount  of  "Surplus  Reserve."  For 
although  every  national  bank  is  obliged  to  re- 
serve a  certain  amount,  the  private  banks  and 
trust  companies  are  not  under  the  same  law,  but 
without  doubt  the  public  will,  in  time,  demand 
laws  compelling  all  to  carry  the  same  reserve. 


StTRPIiUS    RESEi:V^ES    OF   THE   BANKS       205 

In  this  bank  statement  appears  the  item  "Re- 
serve required"  and  either  directly  above  or  di- 
rectly following  this  item  is  also  the  item,  "Re- 
serve held."  It  always  should  be  observed 
whether  the  "Reserve  held"  is  greater  or  less 
than  the  "Reserve  required."  If  the  ."Reserve 
held"  is  greater,  then  there  is  a  "Surplus  Re- 
serve," but  if  not,  then  there  is  a  "Deficit,"  which 
is  a  danger  signal  to  all  interested  in  financial 
or  mercantile  affairs.  Since  a  "Deficit"  occurs, 
as  a  rule,  only  just  preceding  times  of  panic, 
possibly  for  a  few  weeks  out  of  two  or  three 
years,  the  merchant  should  notice  each  week, 
as  he  reads  the  bank  statement,  whether  or  not 
the  "Surplus  Reserve"  is  decreasing  or  increas- 
ing. 

So  long  as  the  "Surplus  Reserve"  decreases,  a 
corresponding  increase  in  money  rates  may  be 
expected;  but  if  it  increases  each  week,  a  de- 
crease in  money-rates  may  follow.  Since  the  de- 
mand for  stocks  usually  increases  as  the  interest 
rate  decreases,  the  stock  market  usually  strength- 
ens and  the  money-rates  decline  with  the  publica- 
tion of  what  is  known  as  a  "good  bank  statement," 
namely,  a  bank  statement  which  shows  an  in- 
crease in  the  "Surplus  Reserve."  On  the  other 
hand,  as  an  increase  in  money  rates  usually 
forces  a  sale  of  stocks,  due  to  the  calling  of  the 


206  BUSINESS  BAROMETERS 

loans,  a  "poor  bank  statement"  is  often  followed 
by  a  drop  in  the  market  prices.  When  the  bank 
statement  is  published  on  Saturday,  the  increase 
in  interest  rates  cannot  come  until  the  following 
Monday,  or  possibly  later,  but  the  speculator 
anticipates  this  by  selling  on  Saturday  immedi- 
ately upon  the  publication  of  a  poor  statement- 
The  first  sellers  after  a  poor  bank  statement  are 
supposed  to  obtain  the  best  prices,  and  the  first 
"buyers  after  a  good  bank  statement  are  supposed 
to  obtain  their  securities  at  the  lowest  prices. 

The  meaning  of  the  word  "surplus"  implies  a 
diflPerence  between  two  other  items ;  thus  an  in- 
crease in  surplus  may  be  due  either  to  a  decrease 
in  one  of  the  items,  or  to  an  increase  in  the  other. 
The  best  bank  statement  is  the  one  where  the  in- 
crease in  "surplus  reserve"  is  due  to  a  reduction 
in  "loans  with  increased  deposits." 

All  merchants  should  keep  a  monthly  record 
of  the  "Surplus  Reserve"  as  per  the  Urst  day 
of  each  month,  although  a  plot  is  not  necessary. 

The  following  conclusions  are  suggested  rel- 
ative to  the  "Surplus  Reserve." 
I.     During  a  Period  of  Business  Depressio^i, 

(a)  An  increase  signifies  lower  money  rates 
"but  continued  dullness. 

(b)  A  decrease  signifies  higher  money  rates 
"but  improved  conditions. 

(c)  No  change  signifies  continued  dullness. 


SURPLUS    RESERVES   OF   THE    BAXKS      207 

2.  During  a  Period  of  Improvement  following 

a  Period  of  Business  Depression. 

(a)  An  increase  signifies  that  the  recovery 
in  business  is  not  very  marked,  and  that  con- 
tinued low  money  rates  may  be  expected. 

(b)  A  decrease  is  always  the  forerunner  of 
higher  money  rates. 

(c)  No  change  is  the  most  favorable  sig^. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  signifies  that  prosperous 
conditions  may  be  expected  to  continue,  with 
no  change  in  money  rates. 

(b)  A  decrease  is  often  a  'danger  signal 
and  is  always  the  forerunner  of  higher  money 
rates. 

(c)  No  change  signifies  continued  prosper- 
ity. 

4.  Daring  a  Period  of  Decline  following  a  Per- 

iod of  Prosperity. 

(a)  An  increase  tends  to  prolong  present 
conditions,  and  to  lower  money  rates. 

(b)  A  decrease  is  a  sign  that  conditions  are 
growing  worse  and  that  higher  money  rates  may 
be  expected. 

(c)  No   change   signifies   uncertainty. 

Bank  Clearings  ^y^ 
(a)     Total    Bank    Clearings    of    the    United 
States. 


208  BUSINESS  BAROMETERS 

(b)     Bank    Clearings    of   the   United    States 
with  the  exception  of  New  York  City. 

In  every  large  city  and  many  small  ones  having 
more  than  two  banks  there  is  an  institution 
known  as  a  clearing  house.  Each  day  at  some 
given  hour  the  representatives  of  all  the  banks 
in  the  city  or  town  meet  at  one  of  the  banks 
and  exchange  checks  drawn  on  one  another.  In 
other  words,  if  customers  of  the  Gloucester 
National  Bank  deposited  during  the  day  $20,000 
in  checks  drawn  on  the  First  National  Bank  of 
Gloucester  and  customers  of  the  First  National 
Bank  deposited  checks  to  the  amount  of  $15,000 
drawn  on  the  Gloucester  National  Bank,  instead 
of  the  Gloucester  National  sending  a  messenger 
to  collect  the  $20,000  from  the  First  National 
and  the  First  National  sending  a  messenger  to 
collect  the  $15,000  from  the  Gloucester  National, 
representatives  of  both  banks  meet  and  exchange 
checks  and  the  First  National  gives  the  Glouces- 
ter National  a  check  for  $5,000  to  balance  the 
account.  This  process,  of  settlement  is  not  of 
great  importance  in  a  city  having  only  two  or 
three  banks,  but  the  average  rapidly  increases 
as  the  number  of  banks  increase.  In  large  cities 
such  as  New  York,  Chicago,  Philadelphia  or 
Boston,  the  clearing  house  occupies  a  separate 
building  and  has   regularly  salaried   employees. 


BANK   CLEARINGS  209 

The  largest  clearing  house  in  this  country  is 
in  New  York  City;  it  was  established  in  Octo- 
ber 1858  and  passes  annually  an  average  of 
over  $50,000,000  in  the  form  of  checks.  In 
all  there  are  about  135  clearing  houses  or  asso- 
ciations in  the  United  States.  In  other  words, 
there  are  about  135  cities  of  sufficient  impor- 
tance and  with  a  sufficiently  large  number  of 
banks  to  have  clearing  houses  and  to  publicly  re- 
port their  "Clearings."  For  further  particulars 
as  to  the  details  of  clearings  and  the  business 
of  clearing  houses  refer  to  Jas.  G.  Cannon's 
most  complete  book  on  the  subject,  entitled, 
''Clearing  Houses,"  and  also  to  "The  Principles 
of  Money  and  Banking"  by  Conant.  For  a  very 
simple  and  condensed  statement,  refer  to  pages 
80-86,  inclusive,  of  "Money  and  Investments"  by 
Montgomery  Rollins. 

Clearings  serve  as  a  very  good  barometer  of 
present  business  conditions  and  the  reason  for 
this  is  as  follows:  Out  of  the  20,000  or  more 
banks  in  the  United  States,  about  one-third  are 
connected  with  one  of  the  above-mentioned  135 
clearing  houses.  This  means  that  practically  all  of 
the  checks  handled  by  these  thousands  of  banks, 
pass  through  some  clearing  house.  Therefore 
by  watching  the  record  of  the  checks  "cleared," 
we  have  an  accurate  idea  of  the  total  business 
transacted   by   about    7,000   banks.      Moreover, 


210  BUSINESS  BAROMETERS 

as  these  7,000  banks  are  the  largest  of  the  20,000 
and  in  fact  control  about  nine-tenths  of  the 
banking  of  the  United  States,  these  clearing 
house  figures  indicate  the  entire  banking  busi- 
ness of  the  United  States  for  any  given  period. 

As  today  practically  all  payments  are  made 
by  check  and  all  business  is  carried  on  through 
the  banks,  the  volume  of  money  handled  by  the 
banks  by  check,  increases  or  decreases  in  con- 
stant ratio  with  the  general  business  of  the  coun- 
try. Therefore,  as  the  banks  pass  their  business 
through  the  clearing  houses,  a  report  on  bank 
clearings  is  a  very  good  barometer  of  present 
business  conditions. 

Some  people  make  the  mistake  of  assuming 
that  by  studying  clearing  house  statistics  one 
can  easily  forecast  business  conditions.  A  study 
of  these  statistics  is  an  aid  in  forecasting  busi- 
ness conditions  and  therefore  is  one  of  the  fac- 
tors used  in  making  such  a  forecast,  but  taken 
"by  themselves  they  are  of  little  value,  as  they 
refer  only  to  present  day  conditions. 

Some  critics  do  not  care  "to  know  about  pres- 
ent conditions,  but  desire  only  to  forecast  future 
'conditions''  This  point  of  view  is  not  logical, 
as  a  knowledge  of  present  conditions  is  a  neces- 
sary step  toward  forecasting  future  conditions. 


BANK  CLEARINGS  211 

Were  it  not  for  the  systematic  reports  received 
on  bank  clearings,  the  barometer  for  present 
conditions  would  be  much  less  valuable.  But 
by  a  study  of  these  clearings,  as  they  are  re- 
ported each  week,  one  is  in  immediate  touch 
with  existing  conditions  throughout  the  coun- 
try and  is  thus  in  a  position  to  intelligently  fore- 
cast future  conditions.  In  making  use  of  these 
statistics,  for  such  a  forecast,  two  methods  are 
used : 

I.  The  bank  clearings  are  plotted  for  each 
week  for  a  number  of  past  years  with  a  hori- 
zontal scale  for  weeks  and  a  vertical  scale  of 
billions..  With  one  half  inch  to  a  week  this 
makes  a  plot  about  thirty  inches  long.  It  is  cus- 
tomary to  have  each  year  under  the  preceding 
year,  which  is  very  easily  done,  as  each  plot  is 
of  the  same  length,  although  the  angle  of  fluc- 
tuations is  not  constant.  This  gives  comparative 
plots  for  several  complete  years,  directly  under 
which  appears  a  plot  for  the  present  year  up  to 
the  receipt  of  the  last  report  on  bank  clearings. 
This  not  only  gives  the  merchant  a  bird's-eye- 
view  of  the  situation  for  the  present  year,  but 
also  an  idea  of  what  may  be  expected  at  different 
periods  of  the  year.  During  some  per- 
iods of  the  year  poor  figures  on  bank  clear- 
ings are  not,  in  reality,  as  unsatisfactory  as  if 


212  BUSINESS  BAROMETERS 

they  had  occurred  at  other  seasons,  The  prin- 
cipal use  of  this  plot  however,  is  to  study  the 
fluctuations  of  the  last  portion  of  the  plotted  line 
for  the  current  year.  In  other  words,  the  busi- 
ness man  notes  whether  the  variation  of  the 
last  few  months  plotted  for  the  current  year, 
is  upward  or  downward  and  also  how  said  var- 
iations compare  with  similar  months  of  pre- 
vious years,  or  in  other  words,  with  normal  fig- 
ures. If  the  plots  for  these  previous  years  can 
be  combined  into  one  plot  for  an  assumed  nor- 
mal year,  the  work  is  greatly  simplified.  This 
may  seem  a  very  simple  procedure,  but  if  really 
comprehended  and  carefully  studied,  it  gives 
not  only  a  bird's-eye-view  of  present  conditions, 
but  in  conjunction  with  a  study  of  other  subjects, 
gives  the  best  possible  idea  of  whether  general 
business  is  becoming  better,  worse,  or  simply 
holding  its  own. 

2.  The  other  method  is  more  mathematical  and 
not  so  readily  comprehended.  Instead  of  plot- 
ting the  figures  for  a  series  of  years,  merchants 
simply  tabulate  the  totals  as  follows: 

Bank  Clearings  of  U.  S. 
Bank  Clearing  of  U.  S.       Excepting  N.  Y. 
Year  Total  Year  Total 

1883  $51,699,823,752   1883  $14,265,522,880 

1884  44,165,125,355   1884   13,179,255,183 


BANK   CLEARINGS  2I3 


1885 

41439,303,599 

1885 

13,287,102,263 

1886 

49,247,681,466 

1886 

15,570,851,854 

1887 

51,091,236,324 

1887 

17,616,680,056 

1888 

49,484,584,175 

1888 

18,384,046,654 

1889 

56,110,250,455 

1889 

20,215,145,550 

1890 

60,546,563,997 

1890 

23,087,956,388 

I89I 

56,657,179,617 

I89I 

22,907,857,405 

1892 

61,919,125,622 

1892 

25,256,657,420 

1893 

54,143,527,180 

1893 

22,822,489,378 

1894 

45,460,058,609 

1894 

21,072,251,587 

1895 

53,180,700,764 

1895 

23,338,903.840 

1896 

51,246,323,830 

1896 

22,375,548,783 

1897 

57,229,070,956 

1897 

23,802,043,485 

1898 

68,826,557,324 

1898 

26,854,774,887 

1899 

94,047,400,783 

1899 

33,258,608,882 

1900 

86.070,549,683 

1900 

33436,347,818 

I90I 

118,410,015,182 

I90I 

38,982,329,340 

1902 

118,023,298,740 

1902 

41,695,109,575 

1903 

109,209,187,164 

1903 

43,238,849,809 

1904 

112,449,664,015 

1904 

43,800,245,342 

1905 

143,872,974,359 

1905 

50,087,388,239 

1906 

157,749,328,913 

1896 

55,132,812,330 

1907 

144,188,663,955 

1907 

57,706,495,574 

1908 

132,272,067,412 

1908 

52,996,187,156 

Column  2  is  for  the  bank  clearings  of  the 
entire  United  States  and  Column  4  is  for  the 
United  States  zvith  the  exception  of  New  York 


214  BUSINESS  BAROMETERS 

City,  In  practice  these  -figures  are  sub-divided 
into  months  and  only  the  past  eight  or  ten  years 
are  studied,  but  this  is  not  necessary  for  the 
purpose  of  illustration.  As  a  second  step,  the 
merchant  notes  from  the  monthly  tables  the 
actual  figures  received  for  the  current  year  and 
estimates  the  probable  clearings  for  the  current 
year.  This  may  be  illustrated  somewhat  as  fol- 
lows:— the  merchant  notes  what  proportion  the 
clearings  for  January,  February  and  March  have 
heretofore  borne  to  the  clearings  of  the  entire 
country.  A  novice  might  think  it  was  simply 
necessary  to  multiply  the  clearings  of  three 
months  by  four  in  order  to  have  an  estimate  for 
the  entire  year,  but  such  a  method  is  not  cor- 
rect, since  it  does  not  provide  for  the  seasonable 
changes  before  alluded  to.  By  making  a  study 
of  the  relation  that  these  three  months  bear  to 
the  entire  year  for  several  years  back,  it  is  pos- 
sible to  make  a  very  good  estimate  for  the  en- 
tire current  year  even  if  only  three  months  are 
reported.  On  making  this  estimate,  it  is  com- 
pared with  the  total  figures  for  previous  years 
and  an  opinion  is  formed  of  the  probable  busi- 
ness conditions  for  the  current  year.  If  the 
matter  were  dropped  at  this  point  these  figures 
would  be  of  no  value,  but  the  merchant  revises 
this   estimate   each   month,   as   new   figures  are 


BANK   CliEARlNGS 


215 


received  and  also  notices  whether  the  revised 
figures  are  increasing  or  decreasing.  In  other 
words,  by  this  second  method  the  merchant 
studies  the  statistics  to  note  whether  each  suc- 
ceeding estimate  is  an  increase  or  a  decrease 
over  the  previous  estimate.  If  the  new  estimate 
is  an  increase,  this  shows  that  business  condi- 
tions are  improving  as  would  an  upward  line 
on  the  plot.  If  the  new  estimate  compared  with 
previous  estimates  is  a  decrease,  it  shows  that 
business  is  decreasing,  as  would  a  downward 
line  on  the  plot.  If  the  new  estimate  is  prac- 
tically the  same  as  the  last  one,  the  estimate  is 
confirmed  and  indicates  that  there  is  no  change 
either  for  the  better  or  for  the  worse,  the  same 
as  shown  by  a  horizontal  line  on  the  plot. 

The  remaining  point  to  be  considered  on  the 
subject  of  bank  clearings  is  the  reason  for  sep- 
arating the  subject  into  the  two  headings  as 
given  at  the  beginning  of  this  paper  and  also 
as  in  the  above  tables.  The  reason  for  this  sub- 
division is  as  follows:  The  clearings  of  New 
York  alone  are  about  one-third  those  of  the  en- 
tire country.  If  these  clearings  were  simply 
a  result  of  commercial  business  transactions,  that 
is,  the  transactions  of  merchants,  manufactur- 
ers and  business  men,  there  is  no  reason  why 


216  BUSINESS  BAROMETERS 

the  New  York  Clearings  should  not  always  be 
included  with  the  clearings  of  other  citifes.  The 
facts  of  the  case,  however,  show  that  an  unduly 
large  percentage  of  New  York  clearings  is 
caused  by  the  transactions  of  brokers  or  is 
intimately  related  to  the  stock  exchange  trans- 
actions. This  may  be  clearly  shown  by  plotting 
two  lines,  one  for  the  transactions  of  the  New 
York  Stock  Exchange  and  the  other  for  the 
bank  clearings  of  New  York.  These  lines, 
although  very  "zig-zag,"  are  almost  parallel  to 
each  other,  and  when  one  rises  the  other  fol- 
lows, and  vice  versa.  For  this  reason  during 
dull  times  on  the  stock  exchange,  bank  clear- 
ings of  the  United  States  including  New  York 
may  show  a  decrease,  even  although  general 
business  throughout  the  country  is  increasing, 
while  during  a  very  active  period  on  the  New 
York  Stock  Exchange,  the  bank  clearings  of 
the  entire  United  States  includPig  Nezv  York, 
may  show  an  increase,  even  although  general 
business  throughout  the  country  is  decreasing. 
For  this  reason,  in  order  to  judge  correctly 
the  general  business  of  the  entire  country,  that 
is,  the  business  of  the  merchants  and  manu- 
facturers, it  is  best  to  consider  the  bank  clear- 
ings of  the  United  States,  with  the  exception 
of  New  York  City.    If  the  figures  for  the  United 


BANK   CLEARINGS  217 

States  zvith  the  exception  of  New  York  City 
have  been  plotted  and  a  conclusion  drawn,  it  is 
also  well  to  then  note  the  figures  for  the  entire 
country,  including  New  York  City.  If  the  fig- 
ures for  New  York  City  confirm  the  conclusion 
arrived  at  when  not  including  New  York  City, 
then  the  result  may  be  considered  absolutely 
correct.  The  most  successful  merchants  tabu- 
late each  month,  both  the  figures  including  and 
excluding  New  York,  but  usually  only  plot  one 
set,  which  is  often  that  for  the  entire  country, 
as  the  records  are  most  complete  in  this  form,. 
The  following  conclusions  are  suggested  rel- 
ative to  "Bank  Clearings." 

1.  During  a  Period  of  Business  Depression- 

(a)  An  increase   signifies  that  trade  is  im- 
proving. 

(b)  A  decrease  signifies  that  conditions  are 
growing  worse. 

(c)  No   change    signifies    that   trade   condi- 
tions are  remaining  fixed. 

2.  During  a  Period  of  Improvement  Following 

a  Period  of  Depression. 

(a)  An  increase  signifies  that  trade  is  con- 
tinuing to  improve. 

(b)  A  decrease  signifies   that   the  improve- 
ment has  temporarily  been  checked. 


218  BUSINESS  BAROMETGRS 

(c)  No  change  shows  that  progress  is  very 
slow. 

3.  During  a  Period  of  Depression. 

(a)  An  increase  shows  that  trade  conditions 
are  very  prosperous,  although  too  great  an  in- 
crease under  such  conditions  often  forecasts 
trouble. 

(b)  A  decrease  shows  that  a  change  is  tak- 
ing place  and  business  is  decreasing. 

(c)  No  change  at  this  point  often  is  a  sign 
that  a  change  is  about  to  take  place. 

4.  During   a   Period   of  Decline   Following   a 

Period  of  Prosperity. 

(a)  An  increase  signifies  a  temporary  check 
in  the  decline. 

(b)  A  decrease  signifies  that  the  period  of 
prosperity  is  over. 

(c)  No  change  shows  uncertainty  or  possi- 
bly serves  to  delay  the  coming  panic. 

Stock  Exchange  Transactions 

There  are  three  features  in  connection  with 
the  New  York  Stock  Exchange  which  are  of 
value  in  forecasting  business  conditions.  They 
are  as  follows : 

1.  The  Quotations. 

2.  The  Transactions. 


STOCK    EXCHANGE    TRANSACTIONS  219 

3.     The  New  Securities  Listed.   (See  section 
entitled  "New  Securities." 

Quotations 

When  studying  the  quotations,  only  a  long  per- 
iod of  time  showing  the  general  tendency  should 
be  considered.  The  fluctuations  from  day  to  day 
are  of  no  value  whatever,  nor  are  the  swings 
covering  only  a  period  of  a  few  weeks.  A  study 
of  the  general  tendency  of  the  market,  however, 
is  of  value  in  forecasting  and  prophesying 
business  conditions. 

If  the  highest  point  of  each  successive  major 
swing  is  higher  than  the  high  point  of  the  pre- 
ceding swing  and  if  the  low  point  of  each  su(;- 
cessive  swing  is  not  so  low  as  that  of  the  pre- 
ceding swing,  then  the  tendency  of  the  market 
is  upward.  If  the  last  high  point  and  the  last  low 
point  are  lower  than  the  high  points  and  low- 
points  of  earlier  periods,  then  the  tendency  of 
the  market  is  downward. 

In  order  to  study  this  matter  intelligently,  a 
plot  should  be  made  of  the  average  prices  of 
the  leading  railroad  and  industrial  stocks.  The 
list  which  many  merchants  use  in  connection 
with  this  work  is  as  follows: 

"Central  of  New  Jersey,"  "Chicago,  Milwau- 
kee &  St.  Paul,"  Delaware  &  Hudson,"  "Great 


220  BUSINESS  BAROMETERS 

Northern/'  "Illinois  Central/'  "Louisville  &  Nash- 
ville/' "New  York  Central/'  "N.  Y.,  N.  H.  & 
Hartford/'  "Pennsylvania"  and  "Pullman."  The 
average  prices  for  these  ten  since  i860  are  giv- 
en in  another  chapter  of  this  book. 

As  an  aid  in  determining  the  tendency  of  the 
market,  merchants  make  a  dot  at  the  center  of 
each  movement,  or  midway  between  the  high 
point  and  the  low  point  of  each  main  swing. 
These  dots  are  then  connected  with  a  line  and 
this  line  shows  at  a  glance  the  tendency  of  the 
market. 

When  two  or  three  plots  are  made,  it  is  in- 
teresting to  compare  a  railroad  plot  with  one 
for  industrials,  as  there  is  a  constant,  though 
complicated  relation  between  the  two.  Space 
does  not  permit  a  description  of  this  matter  in 
detail,  so  it  must  suffice  to  state  that  a  further 
change  in  conditions  may  be  discerned  more 
quickly  by  having  the  two  plots,  one  for  rail- 
roads and  the  other  for  industrials,  than  if  both 
are  averaged  together  on  the  one  plot-  How- 
ever, as  the  industrial  quotations  almost  always 
follow  the  railroad  quotations,  both  in  a  rising 
market  and  in  a  falling  market,  one  plot  simply 
for  the  ten  stocks  above  mentioned  is  perfectly 
satisfactory  and  avoids  confusion. 


STOCK    EXCHANGE    TRANSACTIONS         221 

If  considered  in  a  conservative  manner,  the 
tendency  of  the  stock  market  is  very  interesting 
to  merchants  when  endeavoring  to  forecast  busi- 
ness conditions.  This  is  due  to  the  fact  that  a 
change  in  the  stock  market  is  the  first  visible 
sign  of  a  change  in  general  business  conditions. 
Railroad  earnings  are  absolutely  dependent  upon 
business  conditions,  and  stock  market  quotations 
are  ultimately  dependent  upon  earnings.  There- 
fore, a  rising  market,  over  a  certain  period  of 
time,  means  that  the  majority  of  operators  be- 
lieve that  present  conditions  are  becoming  more 
norrnal,  while  a  falling  market  means  that  these 
operators  believe  that  present  conditions  are  be- 
coming very  abnormal  and  unsatisfactory.  In 
other  words,  a  study  of  the  stock  market  gives 
one  a  composite  idea  of  the  opinions  of  the 
ablest  bankers  and  brokers.  This  is  the  reason 
why  the  stock  market  often  turns  to  go  down 
while  railroad  earnings  are  increasing,  and  often 
turns  to  go  up  while  railroad  earnings  are  still 
decreasing.  In  order  that  an  operator  may  make 
money,  some  other  operator  must  lose  money. 
Therefore,  the  one  who  makes  the  most  is  not 
only  the  one  who  guesses  right,  but  the  one  zvho 
makes  the  right  guess  first.  For  this  reason  the 
stock  markt  movements  are  the  first  public  sign 
of  a  marked  change  in  the  relation  of  present 
business  conditions  to  normal  business  conditions. 


222  BUSINESS  BAROMETERS 

Transactions 

A  study  of  "Quotations,"  without  due  consid- 
eration of  "Transactions,"  is  of  little  value,  be- 
cause a  rising  market,  during  which  only  a  few 
shares  change  hands,  means  very  little,  as  such 
a  market  may  be  the  result  of  manipulation. 
In  the  same  way  a  falling  market,  when  only  a 
few  shares  change  hands,  may  mean  very  little. 
In  order  to  reach  a  correct  conclusion  the  "quo- 
tations" should  be  considered  in  connection  with 
the  "volume."  The  principle  which  we  have 
in  mind  is  the  same  as  "foot-pounds"  in  me- 
chanics, "pounds"  by  themselves  are  meaning- 
less, and  "feet"  by  themselves  have  no  signifi- 
cance to  the  engineer.  It  does  not  mean  very 
much  to  say  the  power  is  sufficient  to  lift  a 
body  weighing  a  hundred  pounds,  or  the  power 
is  sufficient  to  move  a  body  one  hundred  feet. 
But  when  one  states,  that  there  is  power 
enough  to  lift  one  hundred  pounds  through  one 
hundred  feet  of  space,  it  is  possible  to  judge 
correctly  the  power  involved.  A  similar  rela- 
tion exists  between  the  "Quotations"  and  the 
"Transactions." 

Therefore  the  leading  bankers  not  only  tabu- 
late the  quotations  of  the  leading  railroad  and 
industrial  stocks,  but  also  the  number  of  shares 


STOCK    EXCHANGE    TRANSACTIONS  223 

traded  in  during  a  day.  Often  in  addition  are 
tabulated  the  bond  sales  on  the  exchange.  When 
the  volume  of  business  for  any  one  or  more  months 
is  constant,  one  may  judge  business  conditions 
by  the  quotations  alone,  but  unless  this  vol- 
ume is  constant,  its  variations  should  always 
be  taken  into  account.  An  average  rise  in  the 
market  of  i%  with  a  volume  of  2,000,000  shares 
means  a  rise  in  the  market  of  more  than  4% 
with  a  volume  of  only  200,000  shares. 

Under  the  subject  of  "Plots  and  Charts"  may 
be  found  a  description  of  how  plots  are  used  by 
stock  exchange  houses  for  prophesying  changes 
and  turns  in  the  market.  This  description  is 
omitted  here,  as  it  need  not  be  read  by  those 
who  wish  simply  to  study  the  best  methods  of 
forecasting  general  business  conditions.  Statis- 
ticians of  stock  exchange  houses  will  be  inter- 
ested in  such  reading,  but  merchants  should 
purposely  avoid  the  subject.  If  followed  too 
closely,  these  stock  market  plots  are  apt  to  be 
misleading,  and  in  turning  the  attention  from 
the  main  object  of  this  work,  are  a  hindrance. 
The  business  of  the  merchant  is  not  to  anticipate 
stock  exchange  movements,  but  business 
movements.  Although  there  is  a  relation  be- 
tween the  two,  they  are  entirely  distinct. 


224  BUSINESS  BAROMETERS 

The  following  conclusions  are  suggested  rela- 
tive to  "Stock  Exchange  Conditions."* 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  is  a  distinctly  favorable 
sign  that  better  trade  conditions  may  be  ex- 
pected. 

(b)  A  decrease  is  a  sign  that  continued  dull- 
ness may  be  expected. 

(c)  No  change  signifies  uncertainty. 

2.  During  a  Period   of  Improvement  Follow- 

ing a  Period  of  Business  Depression. 

(a)  An  increase  signifies  that  still  better 
business  conditions  may  be  expected. 

(b)  A  decrease  signifies  that  the  improve- 
ment is  not  to  be  as  rapid  as  first  expected. 

(c)  No  change  signifies  temporary  uncer- 
tainty. 

3.  During  a  Period  of  Prosperity. 

(a)  A  great  increase  is  an  unfavorable  sign 
for  the  reason  that  there  is  about  to  be  a  change. 

(b)  A  great  decline  is  a  distinctly  unfav- 
orable sign  and  signifies  that  a  cessation  of  busi- 
ness may  be  expected  at  any  time. 

*(In  all  studies  of  "transactions"  it  must 
always  be  noted  whether  the  transactions  in- 
crease when  the  prices  are  increasing  or  de- 
creasing). 


NEW  SECURITIES  225 

(c)  No  change  signifies  uncertainty  among 
the  brokers. 

4.     During   a   Period   of   Decline   FoUoiving   a 
Period   of  Prosperity. 

(a)  An  increase  signifies  that  liquidation  is 
in  progress. 

(b)  A  decrease  signifies  less  satisfactory 
conditions. 

(c)  No  change  signifies  temporary  uncer- 
tainty. 

New  Securities 

The  reason  for  studying  the  subject  of  "New 
Listings"  may  be  understood  by  a  study  of  the 
thjee  following  fixed  laws  of  economics: 

1.  During  a  Period  of  Prosperity,  as  the 
number  of  new  companies,  new  promotions  and 
new  securities  listed  increases,  the  danger  of  a 
panic  increases  and  the  time  betzveen  said  period 
of  Prosperity  and  a  future  period  of  Depression 
decreases. 

2.  When  the  number  of  nezu  promotions, 
new  companies  and  nezu  listings  is  at  a  minimum, 
financial  depression  is  sure  to  be  reaching  an  end. 

3.  As  the  number  of  new  companies,  nezv 
promotions  and  nezv  listings  increases  from  a 
minimum,  the  gradual  increase  is  a  sign  of  im- 


226  BUSINESS  BAROMETERS 

proved  conditions  until  the  normal  number  of 
new  companies,  new  promotions  and  new  list- 
ings is  reached,  after  which  an  increase  again 
becomes  a  source  of  danger. 

Out  of  the  list  of  twenty-five  subjects  of 
which  this  book  treats,  this  one,  namely,  "The 
Number  of  New  Companies,  New  Promotions 
and  New  Securities  Listed,"  is  the  only  one  by 
which  it  was  clearly  possible  to  forecast  the  pan- 
ic of  1903.  For  this  reason  this  panic  was  said 
to  be  due  to  "undigested  securities"  and  was 
known  as  "The  Rich  Man's  Panic." 

Of  course  one  cannot  rely  upon  the  study  of 
this  one  subject,  as  many  panics  have  taken 
place  when  the  figure  for  "New  Securities"  has 
been  normal  and  the  change  in  conditions  could 
only  have  been  forecasted  by  a  study  of  the 
other  subjects.  In  fact,  the  difficulty  m  study- 
ing this  subject  is  that  the  figures  remain  very 
constant  for  a  long  period  of  time,  and  it  is  only 
the  great  dips,  one  way  or  the  other,  which  are 
of  any  use. 

Under  normal  conditions  a  study  of  this  sub- 
ject is  of  little  value,  but  most  useful  under 
abnormal  circumstances.  If  we  are  in  a  period 
of  depression  and  we  reach  a  period  where  no 
new  companies  are  incorporated  and  there  are 
absolutely  no   new  promotions   or  listings,   we 


NEW  SECURITIES  227 

may  be  sure  of  better  conditions  in  the  near  fu- 
ture. Conversely,  if  we  are  in  a  period  of  pros- 
perity and  there  are  an  abnormally  large  num- 
ber of  promotions,  an  abnormally  large  number 
of  new  corporations  being  formed  and  new  se- 
curities being  listed,  we  may  be  absolutely  sure 
of  trouble.  This  usually  comes  first  in  the  form 
of  tight  money,  followed  immediately  by  a  de- 
cline in  the  stock  market  and  later  by  a  period  of 
depression  in  business  conditions. 

The  following  figures  clearly  show  this  and 
particularly  in  connection  with  the  "Panic  of 
1903." 


Year 

Stocks:  Total  value  includ- 
ing new  capital,  old  and  re- 
funding issues. 

Year 

Bonds:  Total  val- 
ue including  new 
capital,  old  and  re- 
funding issues. 

1885 

$56,913,116 

1885 

5^197.259,000 

1886 

329,469,350 

1886 

238,097,690 

1887 

270,053,550 

1887 

343.477.321 

1888 

248,228,275 

1888 

511,002,218 

1889 

259.649.774 

1889 

389,720,000 

1890 

437.992,330 

1890 

684,867,879 

1891 

188,914.954 

189I 

287,645,700 

1892 

237,036,105 

1892 

317,861,500 

1893 

198,245,261 

1893 

288,803,400 

1894 

251,193.003 

1894 

309,804,600 

1895 

143.373.970 

1895 

257,275,400 

1896 

590,732,215 

1896 

582,286,700 

1897 

502,974.891 

1897 

357,415,902 

1898 

528,153.996 

1898 

700,064,680 

1899 

704,172,605 

1899 

525,384,240 

228  BUSINESS  BAROMETERS 


1900 

620,935,000 

1900 

443,713,000 

I90I 

1,642,013,715 

I90I 

923,010,100 

1902 

784,032,595 

1902 

a533.519.300 

1903 

426,890,295 

1903 

581,288,800 

1904 

175,866,800 

1904 

535,079,600 

1905 

533434.900 

1905 

980,026,650 

1906 

662,769,450 

1906 

b57i,898,500 

1907 

576,032,050 

1907 

420,813,000 

1908 

513.927,450 

1908 

827,958,000 

(a)  Does  not  include  Imperial  Russian  States 
4%  Certificates  $1,155,000,000. 

(b)  Does  not  include  $425,000,000  Japanese 
Government  bonds. 

Therefore  all  merchants  systematically  tabu- 
late each  month  the  amount  of  new  securities 
listed,  although  the  ^'stocks''  and  "bonds"  are 
added;  thus  avoiding  the  necessity  of  tzvo  tables. 

The  following  conclusions  are  suggested  rel- 
ative to  "New  Securities  Issued." 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  signifies  that  confidence  is 
returning, 

(b)  A  decrease  signifies  that  continued  dull- 
ness may  be  expected. 

(c)  No  change  generally  signifies  the  same. 

2.  During  a  Period   of  Improvement  Follow- 

ing A  Period  of  Business  Depression. 
(a)     An  increase  signifies  that  permanent  im- 
provement is  under  way. 


NEW  SECURITIES  229 

(b)  A  decrease  means  that  the  improvement 
has  been  temporarily  checked. 

(c)  No  change  signifies  that  the  improve- 
ment is  progressing  very  slowly. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase,  especially  if  great,  is  a  sign 
of  impending  disaster  and  the  culmination  of 
the  period  of  prosperity. 

(b)  A  decrease  tends  to  lengthen  said  per- 
iod. 

(c)  No  change  usually  calls  for  caution. 

4.  During   a   Period   of   Decline  Following   a 

Period   of  Prosperity. 

(a)  An  increase  is  a  sign  that  much  worse 
conditions  may  be  expected  before  the  bottom 
is  reached. 

(b)  A  decrease  indicates  that  conditions  are 
naturally  adjusting  themselves. 

(c)  No  change  is  a  bad  sign,  if  large  issues 
are  still  being  offered,  but  otherwise  it  shows 
nothing  of  importance. 

Business  Failures 

Every  great  crisis  has  been  made  known  to 
the  public  by  one  or  more  large  failures,  some- 
times accompanied  by  the  exposure  of  dishonest 
methods,  sometimes  by  political  or  national  calam- 


230  BUSINESS  BAROMETERS 

ity,  more  often  by  the  failure  of  some  bank  or 
number  of  banks  in  endeavoring  to  finance  in- 
dustries or  nejw  corporate  undertakings.  So 
failures, — that  is,  large,  single  failures, — stand 
as  signals  of  sharp  crises,  and  the  beginning  of 
depression.  They  may  be  followed  by  other 
large  failures  and  many  small  ones,  so  quickly 
that  the  total  of  both  number  of  failures  and 
liabilities  for  the  panic  year  is  swelled  as  in 
1893,  above  the  limits  of  other  years  just  pre- 
ceding or  following  it,  or  the  failure  record  may 
move  slowly  and  more  than  a  year  be  needed 
for  any  great  change.  Failure  statistics,  how- 
ever, are  of  principal  use  in  determining  the 
probable  length  of  a  period  of  depression,  and 
the  following  figures  show  that — following  a 
crisis — in  no  case  has  prosperity  returned  until 
failure  statistics  became  normal. 
FAILURE  STATISTICS  FOR  THE  UNITED  STATES 
Table  i 
Compiled  from  figures  furnished  by  R.  G.  Dun  &  Co. 


Year 

No  of 
Failures 

Liabilities 
Expressed 
in  Millions 

Year 

No  of 
Failures 

Liabilities 
Expressed 
in  Millions 

1857 

4,932 

291.8 

1865 

530 

17.6 

1858 

4,225 

95-7 

1866 

1,505 

53-8 

1859 

3.913 

64.4 

1867 

2,780 

96.7 

i860 

3,676 

79.8 

1868 

2,608 

63-7 

1861 

6,993 

207.2 

1869 

2,799 

750 

1862 

1,652 

23.0 

1870 

3,546 

88.2 

1863 

495 

7-9 

1871 

2,915 

85.2 

1864 

520 

8.6 

1872 

4,069 

121.1 

BUSINESS  FAILURES  231 


1873 

5.183 

228.5 

1891 

12,273 

189.9 

1874 

5,830 

1552 

1892 

10.344 

114. 0 

1875 

7,740 

201 .0 

1893 

15,242 

346.8 

1876 

9,092 

191. 1 

1894 

13,885 

172.9 

1877 

8,872 

190.7 

1895 

13,197 

173.2 

1878 

10,478 

234 -4 

1896 

15,088 

226.1 

1879 

6,658 

98.1 

1897 

13,351 

1543 

1880 

4,735 

65.8 

1898 

12,186 

130.7 

I88I 

5,582 

81.2 

1899 

9,337 

90.9 

1882 

6,738 

101.5 

1900 

10,774 

138.5 

1883 

9,184 

172.9 

1901 

11,002 

1131 

1884 

10,968 

226.3 

1902 

11,615 

117.5 

1885 

10,637 

124.2 

1903 

12,069 

1554 

1886- 

9,834 

114. 6 

1904 

12,199 

144.2 

1887 

9,634 

167.6 

1905 

11,520 

102.7 

1888 

10,679 

123.8 

1906 

10,680 

119.2 

1889 

10,882 

148.8 

1907 

11,725 

1974 

1890 

10,907 

189.9 

As  example  of  such  reading  of  the  figures, 
note  in  the  above  table  the  year  1857,  both  for 
number  and  liabilities.  Note  that  the  crisis  is 
indicated  in  the  amount  of  liabilities,  while  1858 
shows  a  still  larger  number  of  failures  but  a 
reduction  of  liabilities  amounting  to  more  than 
32.8  per  cent.  The  next  three  years  show  de- 
pression by  a  relatively  large  number  of  failures ; 
but  they  are  of  lessening  average  amount  of  li- 
abilities. That  failure  of  statistics  may  indicate 
not  only  the  length  but  the  general  character  of 
a  depression  is  proved  particularly  well  from  the 
course  they  take  after  the  crisis  year  of  1873  to 


232  BUSINESS  BAROMETERS 

the  height  of  the  depression  in  1878  and  for  a 
shorter  period  from  1893  to  the  culminating 
year  of  1896.  From  this  table  it  is  evident  also 
that  the  number  of  failures  is  often  larger 
toward  the  end  of  the  depression  than  during 
the  crisis  year,  but  the  average  of  liabilities  per 
failure  is  less. 

FAILURE  STATISTICS  FOR  THE  UNITED  STATES 

Table    1 1 

Compiled  by  figures  furnished  by  R.  G.  Dun  &  Co. 

Per 
Liabilities    Liabilities  cent 
Number  of  Average        per  capita    per  firm  in    of 

Year     Failures     Liabilities    Liabilities  of  population  business  fai'res 

1875     7,740  $201,060,333    $25,960  H. 55  $339.87     1.21 


1876 

9,092 

191,117,786 

21,020 

4.23 

305.15 

1.33 

1877 

8,872 

190,669,936 

21,491 

4.11 

302.60 

1.36 

1878 

10,478 

234,383,132 

22,236 

4.92 

259.49 

1.55 

1881 

5,582 

81,155,932 

14,530 

1.58 

108.65 

.71 

1882 

6,738 

101,547,564 

15,070 

1.93 

129.94 

.83 

1883 

9,184 

172,874,172 

18,823 

3.22 

210.23 

1.06 

1884 

10,968 

226,343,427 

20,632 

4.12 

261.94 

1.21 

1885 

10,637 

124,220,321 

11,678 

2.21 

137.28 

1.16 

1886 

9,834 

114,644,119 

11,651 

2.00 

124.60 

1.01 

1893 

15,042 

346,779,889 

22,751 

5.22 

290.65 

1.28 

1894 

13,885 

172,992,856 

12,458 

2.55 

155.25 

1.25 

1900 

10,774 

138,495,673 

12,854 

1.81 

119.63 

.92 

1901 

11,002 

113,092,376 

10,279 

1.45 

94.63 

.90 

1902 

11,615 

117,476,769 

10,114 

1.49 

94.85 

.93 

1903 

12,009 

155,444,185 

12,879 

1.94 

122.33 

1.12 

1904 

12,199 

144.202,311 

11,820 

1.76 

111.33 

.92 

1905 

11,520 

102,676,172 

8,193 

1.24 

78.75 

.85 

1906 

10,682 

119,201,515 

11,159 

1.41 

86.52 

.77 

1907 

11,725 

197,385,225 

16,834 

2.31 

139.75 

.82 

1908 

15,690 

1.08 

From  this  second  table  we  have  another  view 
of   the   usefulness   of   failure  statistics.     As   in 


BUSINESS  FAILURES  233 

table  one,  the  panic  years  are  plainly  marked 
by  the  per  cent  of  failures  to  the  total  number 
of  firms  in  business,  but  table  two  also  shows 
something  additional  relative  to  business  condi- 
tions. 

We  find  that  up  to  1878  the  possibility  of  loss, 
that  is  the  ratio  of  "liabilities"  to  the  "number 
of  firms  actually  in  business,"  was  large  or  in- 
creasing from  year  to  year,  as  was  again  true 
from  1893  to  1896,  while  the  effect  of  the  cri- 
sis of  1903  gave  place  very  quickly  to  prosperous 
conditions,  not  equalled  in  this  respect  for  thirty 
years.  This  table  gives  a  very  valuable  measure 
in  the  "per  cent  of  failures"  to  the  firms  in  busi- 
ness. This  shows  that  such  figures  as  it. 002 
for  the  failures  in  1901  and  16,428  for  1878 
marked  two  degrees  of  depression  more  widely 
different  than  they  would  seem  at  first  glance, 
and  that  the  high  number  11,725  of  1907  or 
even  15,675  in  1908  to  an  indication  of  condi- 
tions much  less  severe  than  the  7,740  of  1875. 

Nevertheless,  the  study  of  the  past,  however 
interesting  as  pure  history,  is  regarded  only  as 
a  means  of  understanding  the  significance  of 
current  changes  and  the  points  above  mentioned 
are  of  value  only  in  connection  with  the  present 
day  figures. 

The  year  1907  is  of  special  interest  in  this  con- 


234  BUSINESS  BAROMETERS 

nection.  It  is  known  as  a  ''panic  year,"  and  the 
events  of  the  months  following  October  with  its 
signal  failures  of  certain  New  York  banks  be- 
comes a  part  of  history  closely  joined  to  present 
problems.  While  it  is  true  that  not  one,  but  all 
factors,  must  be  weighed  together  in  estimating 
the  comparative  position  of  1907  among  critical 
periods,  the  statisticians  find  something  of  spe- 
cial value  in  the  statistics  of  failures. 

Statistics  of  the  year  are  available  in  different 
forms.  Divided  into  months,  as  is  the  custom- 
ary way  for  merchants  to  compile  them,  there 
is  meaning  to  be  found  in  the  year's  record  on 
lines  similar  to  those  used  for  the  annual  tables. 
The  following  figures  for  liabilities  expressed  in 
millions,  serve  as  illustrations:  The  "number" 
is  omitted  from  these  tables,  as  it  is  not  custom- 
ary for  merchants  to  record  said  figures.  If 
additional  tables  are  desired,  the  ''per  cent  to 
the  firms  in  business"  is  recommended. 

Compiled  from  figures  furnished  by  R.  G. 
Dun  &  Co. 


Month 

1903 

1904 

1905 

Jan. 

$12,978 

$18,483 

$10,417 

Feb. 

10.907 

15.812 

9.780 

Mar. 

10.458 

13770 

9.964 

Apr. 

11.811 

13-136 

8.056 

May 

12.314 

9.817 

8.907 

BUSINESS  FAILURES  235 


June 

8.326 

8.469 

8.777 

Jtily 

17.751 

8.812 

6.148 

Aug. 

10,877 

1 049 1 

6.140 

Sept. 

7.229 

12.864 

8.039 

Oct. 

18.387 

10.525 

6.751 

Nov. 

16.422 

8.535 

8.866 

Dec. 

18.978 

13.481 

10.823 

Vlonth 

1906 

1907 

1908 

Jan. 

11.952 

13.628 

27.099 

Feb. 

10.859 

10.283 

27.064 

Mar. 

10.949 

8.163 

21.542 

Apr. 

8.059 

11.082 

20.316 

May 

12.992 

9-965 

13-643 

June 

7.850 

16.444 

14.708 

Jtiiy 

6.919 

12.334 

14.222 

Aug. 

8.821 

15-197 

23-782 

Sept. 

6.255 

18.935 

17.298 

Oct. 

10.553 

27.444 

15.898 

Nov. 

11.980 

17.637 

12.599 

Dec. 

12.006 

36.296 

14-139 

These  tables  give  examples  of  what  may  serve 
as  types  of  years,  that  is,  1903  had  what  was 
called  "the  rich  man's  panic"  beginning  with  the 
stock  market  in  the  summer  of  that  year  and 
continuing  as  shown  very  clearly  by  the  tables. 
Normal  years,  such  as  1905  or  1906,  show  heav- 


236  BUSINESS  BAROMETERS 

iest  liabilities  from  October  to  March,  any  in- 
crease between  these  times  coming  just  before 
or  just  after  the  fiscal  year.  The  presence  of 
business  trouble  is  indicated  in  July  of  1903, 
when  we  find  the  amount  of  liabilities  very  much 
increased;  moreover,  the  increase  and  this  ratio 
are  maintained,  practically  unbroken  for  ten 
months.  While  this  table  cannot  of  itself  give 
us  entire  information,  because  a  true  study  of 
statistics  goes  no  further  than  absolute  knowl- 
edge, the  points  just  show^n  bring  us  close  to 
our  every  day  use  of  such  figures.  Wiithout 
knowing  anything  of  the  exact  causes,  a  man 
with  these  figures  at  his  hand  could  not  have 
failed  to  think  a  little  when,  in  the  report  for 
June  1907,  liabilities  ran  over  40%  higher  than 
in  1906  and  nearly  as  much  higher  than  1905. 
As  the  new  figures  were  received  each  month 
and  the  month  of  September  reached  an  aggre- 
gate of  nearly  $19,000,000  compared  with 
$8,039,947  for  the  same  number  of  failures  in 
September  1905,  surely  the  change  in  ratio  could 
have  told  something  very  definite  as  to  the  ap- 
proach of  bad  times.  Considering  the  liabili- 
ties in  connection  with  the  per  cent,  of  fail- 
ures we  find  the  crisis  month  to  have  been  No- 
vember, (average  liabilities  $32,026.80  as  com- 
pared with  December  $30,760.06)  for  we  main- 


BUSINESS  FAIIiURES  237 

tain  that  the  smaller  "per  cent."  with  heaviest 
liabilities,  marks  the  financial  climax;  that  is, 
the  public  break  or  the  great  signal  failure  that 
openly  declares  trouble.  By  the  'quickest, 
roughest  estimates,  the  course  of  affairs  can  be 
very  plainly  traced  by  having  these  failure  sta- 
tistics at  hand. 

While  to  obtain  accurate  comparisons  of  the 
progress  of  the  current  year,  as  compared  with 
others,  always  requires  more  close  calculating 
of  the  percentage  in  gain  or  loss  per  firm  in 
business  J  yet  the  work  yields  a  good  return. 
These  current  figures  are  those  most  constantly 
watched  by  bankers  and  merchants  who  prefer 
to  have  their  own  eyes  on  the  clouds  ahead, 
rather  than  trust  entirely  to  a  less  interested 
authority. 

The  following  table  (Bradstreet's)  is 
also  of  interest  in  connection  with  analyses  of 
failures,  although  these  figures  are  of  no  use  in 
forecasting  business  conditions. 
PERCENTAGE  OF  FAILURES  AND  LIABILITIES 
CLASSIFIED  AS  TO  CAUSES 
UNITED  STATES  PER   CENT 

Number 

Failure  due  to  1907  1906  1905  1904 

Incompetence  .  22.6  22.3  24.4  23.1 

Inexperience..  4-9       4-9  4-8  5-i 

Lack  of  capital  37.1  35-9  33-4  32.2 

Unwise  credits  2.3       2.6  3.5  3.4 
Failures          of 

others    1.4       2.0  2.2  2.5      3.3       8.8       4.5       8. 


Liabilities 

9< 

)7 

1906     1905 

1904 

8 

1 

3 

9 
2 

4 

I 

15.5  21.6 
2.2       2.1 

30.9  33.0 
2.1       4.2 

14. 1 
3.2 

31.8 
4.8 

238  BUSINESS  BAROMETERS 

Number  Liabilitiea 

Failure  due  to  1907     1906  1905  1904    1907     1906    1905     1904 

Extravagance  .  .9       I.o  i.i  .8 

Neglect   2.5       2.2  2.9  3.1 

Competition..  1.2       i.o  1.5  1.3 
Specific       Con- 
ditions   16.3     17.3  16.3  19. I 

Speculation...  .7          .8  .7  .8 

Fraud    10. i     10. o  9.2  8.6 


.5  .9  .12     .7 

•S  i-S  i-i       1-6 

.4  .4  .9       I.o 

SI. 7  17.9  IS-S  22.7 

4.9  3.6  7.7       5-3 

S.I  16.2  8.2       6.4 


For  example,  if  1907  showed,  as  is  claimed, 
37.1%  failure  due  to  loss  of  capital,  and  if  fig- 
ures show  that  this  cause  is  increasing  year  by 
year,  it  means  clearly  that  the  beginnings  of 
new  enterprises  must  be  increasingly  well  sup- 
ported, as  it  grows  more  difficult  to  add  to  inad- 
equate capital  when  money  rates  are  high  or 
competition  makes  it  imperative  to  expand.  As 
inexperienced,  comparatively  incompetent  heads 
must  continually  join  the  ranks,  constant  watch- 
ing of  the  details  of  failure  statistics  is  a  prac- 
tical necessity  for  them  as  well  as  for  those 
whose  money  is  invested  in  their  interests. 

As  Bradstreet's  tables  exclude  all  losses  ex- 
cept those  strictly  commercial ;  that  is,  those 
failures  involving  loss  to  creditors  of  individual 
firms,  or  corporations  engaged  in  legitimate 
mercantile  occupations,  they  cannot  be  com- 
pared, figure  for  figure,  with  the  tables  from 
other  sources,  but  believing  that  the  figures  due 
to  failure  in  insurance,  real  estate,  brokerage, 
etc.,   do    have  a   distinct    effect    upon    general 


BUSINESS  FAILURES  239 

business  conditions,  the  analysis  of  these  also 
should  be  a  part  of  a  study  of  the  whole  sub- 
ject. Certain  facts,  however,  included  in  the 
interesting  report  before  alluded  to,  should  be 
mentioned  here  as  bearing  on  the  question.  One 
of  these  we  have  already  suggested;  namely, 
that  as  the  country  advances,  statistics  furnish 
evidence  that  the  "commercial  death  rate"  is 
growing  less.  The  decrease  is  as  yet  not  one- 
half  of  one  per  cent.,  but  the  rate  is  being  re- 
duced from  1 5^%  maximum  to  something  under 
1%.  Of  course  we  should  like  to  believe  that 
this  is  a  permanent  improvement  in  business 
intelFigence,  but  this  point  the  future  only  can 
prove. 

Another  law  recognized  by  merchants  and 
already  suggested  in  this  discussion,  is  that  small 
firms  do  not  feel  the  effect  of  a  panic  or  de- 
pression until  sometime  after  the  effect  is  felt 
by  the  larger  firms.  For  this  and  other  reasons 
the  study  of  this  subject  is  especially  valuable 
as  a  guide  and  protection  to  small  merchants 
and  storekeepers. 

In  conclusion  we  will  repeat  that  the  figures  are 
of  greatest  value  to  all  in  determining  what  the 
length  of  the  present  "period"  will  be,  and  how 
soon  one's  own  business  and  that  of  others,  in 


240  BUSINESS  BAROMETERS 

which  he  has  greater  or  less  investments  of  capi- 
tal, may  be  expected  to  show  a  change.  When 
the  flood  begins  to  subside  from  its  high  water 
mark,  a  study  of  the  rate  at  which  it  is  sub- 
siding, and  a  knowledge  of  the  condition  of  each 
tributary  stream  assists  very  much  in  estimating 
the  time  when  seed  may  be  planted  in  the  rich 
bottom  land,  now  under  water,  or  inversely  as 
the  case  may  be.  We  need  not  carry  this  figure 
of  speech  further,  in  order  to  show  that  it  con- 
tains the  idea  upon  which  merchants  rate  the 
study  of  Business  Failures  as  of  fundamental 
importance  to  their  progress.  For  such  study 
is  but  a  part  of  a  system  by  which  they  may 
know  exactly  the  conditions  upon  which  the 
next  move  should  be  based,  and  upon  the  re- 
sult of  which  depends  the  subsequent  course  of 
the  business  life  of  each  individual. 

The  following  conclusions  are  suggested  rel- 
ative to  "Business  Failures." 

I.     During  a  Period  of  Business  Depression- 

(a)  An  increase  signifies  that  the  depression 
is  not  ended. 

(b)  A  decrease,  after  a  large  increase,  signi- 
fies that  a  change  for  the  better  may  be  expect- 
ed. 


BUSINESS   FAXIiURES  241 

(c)  No  change  signifies  that  caution  is  still 
necessary. 

2.  During  a  Period  of  Improvement  Follozving 

a  Period  of  Business  Depression. 

(a)  An  increase  in  failures  signifies  that  the 
improvement  may  be  temporarily  checked. 

(b)  A  continued  decrease  signifies  that  the 
improvement   is   progressing   satisfactorily. 

(c)  No  change  signifies  that  caution  is  still 
necessary. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  in  failures,  especially  large 
concerns,  signifies  that  a  change  for  the  worse 
may  be  expected. 

(b)  A  decrease  signifies  that  prosperity  may 
be  expected  to  continue  a  while  longer. 

(c)  No  change  signifies  nothing  of  import- 
ance. 

4.  During  a   Period    of  Decline   follozving    a 

Period  of  Prosperity. 

(a)  An  increase  signifies  that  conditions  are 
daily  becoming  worse. 

(b)  A  decrease  signifies  that  a  temporary 
check  may  be  expected  in  the  decline. 

(c)  If  there  is  no  change  the  figure  need 
not  be  considered. 


242  BUSINESS  BAROMETERS 

Immigration  Figures  and  Labor  Conditions 

The  general  subject  of  labor  conditions  is  of 
importance  in  diagnosing  present  business  con- 
ditions and  in  forecasting  changes  which  may 
be  expected.  But  labor  interests  involve  so 
many  factors  and  include  so  wide  a  field  of  in- 
vestigation that,  with  the  statistics  at  present 
available,  it  is  absolutely  impossible  to  compile 
figures  that  are  sufficiently  complete  to  tabulate 
for  comparative  purposes.  It  is  hoped  that  some 
day  either  the  labor  unions  or  the  government 
will  find  some  practical  means  of  keeping  exact 
records  of  the  number  of  men  out  of  work,  the 
rate  of  wages  in  effect  and  other  items  necessary 
for  this  purpose. 

At  present  the  only  complete  figures  are  the 
census  reports  compiled  once  in  ten  years,  and 
partial  figures  of  some  of  the  states  reported 
only  once  in  five  years,  but  neither  set  of  fig- 
ures is  of  much  use  to  the  business  man.  There 
are  also  certain  states  which,  in  connection  with 
the  public  employment  bureaus,  publish  a  classi- 
fied list  every  week  or  month  entitled  "applicants 
desiring  work,"  but  these  lists  are  very  incom- 
plete and  their  records  of  little  more  practical 
use,  as  statistics,  than  are  the  similar  records 
kept  by  the  leading  charitable  institutions.  If 
every  city  or  charitable  institution  did  the  work 


liABOR  COXDITIOXS  243 

thoroughly  and  kept  the  dead  matter  weeded 
out,  a  pubUcation  of  the  results  would  be  worth 
while,  although  they  might  cover  but  a  small 
portion  of  the  country.  The  same  might  be 
said  of  the  labor  union  figures.  These,  if  kept 
properly  and  accurately  for  a  definite  period 
and  area,  would  be  very  valuable  to  the  manu- 
facturer and  Susiness  man,  but  under  present 
conditions  they  are  at  the  most  only  suggestive, 
not  fit  for  precise  analysis.  Of  all  available  sta- 
tistics, those  coming  from  the  Commfssioner  of 
Labor  are  the  most  to  be  depended  upon ;  month- 
ly reports  of  the  same  sort  would  be  of  distinct 
value  for  the  purposes  of  Fundamental  Statis- 
tics. With  his  present  office  methods  however, 
even  his  work  is  not  at  all  adapted  to  our  use. 

For  either  determining  the  present  trend  or 
forecasting  the  approaching  conditions,  only  fig- 
ures which  can  be  used  for  comparative  purposes 
are  of  value.  It  is  not  necessary  to  have  month- 
ly figures  covering  a  large  section  of  the  coun- 
try, but  they  must  cover  the  same  section  of  the 
country  at  each  statement.  It  makes  little  differ- 
ence whether  the  reports  are  issued  weekly  or 
monthly,  but  it  is  of  vital  importance  to  sys- 
tematic work  that  each  report  should  cover  the 
same  period  of  time, — that  is,  either  one  week 
•or  one  month  regularly.    Therefore,  while  there 


7.44  BUSINESS  BAROMETERS 

are  today  many  organizations  preparing  figures 
which  may,  after  a  time,  become  of  distinct 
value  for  comparative  purposes,  none  of  them 
have  yet  reached  the  point, — with  the  possible 
exception  of  those  from  the  Immigration  De- 
partment of  the  United  States. 

The  immigration  -figures  are  issued  monthly, 
each  report  covering  the  same  ports,  and  these 
■figures  all  systematic  manufacturers  and  mer- 
chants carefully  tabulate. 

One  of  the  valuable  features  of  the  present 
day  method  of  studying  Fundamental  Statis- 
tics, under  twelve  general  headings,  is  that  un- 
der each  general  heading  or  group,  sub-topics 
can  be  added  at  any  time,  extending  over  an 
increasing  amount  of  subject-matter.  For  ex- 
ample, the  subject  of  this  group  is  "Labor  Condi- 
tions" and  at  the  present  time  the  only  figures 
tabulated  are  those  on  immigration,  but  as  soon 
as  suitable  reports  from  the  labor  unions,  char- 
itable institutions,  or  other  sources  are  obtain- 
able, additional  tables  can  be  inserted  for  these 
additional  figures.  All  such  subjects,  accurately 
reported  will  contribute  to  an  exact  understand- 
ing of  the  condition  of  labor  in  this  country.  In 
other  words,  in  the  final  deductions,  the  same 
amount  of  weight  will  be  given  to  "Labor  Con- 


LABOR  CONDITIONS  245 

ditions"  as  formally,  but  in  arriving  at  our  de- 
cision as  to  labor  conditions,  there  will  be  more 
factors  to  consider. 

The  reason  for  using  immigration  figures,  is 
that  they  are  an  extremely  good  barometer  of 
labor  conditions.  The  steamship  lines  maintain 
a  balance  in  the  supply  of  labor  between  the 
United  States  and  Europe.  Labor,  like  water, 
seeks  its  own  level,  when  both  living  expenses 
and  wages  are  considered.  Of  course,  if  it  costs 
five  times  as  much  to  live  in  New  York  as  in 
Italy,  the  Italian  laborer  will  not  come  to  this 
country  for  simply  five  times  the  wages  that  he 
receives  at  home,  provided  the  demand  for  la- 
bor is  the  same  in  each  country.  Therefore, 
wages,  living  expenses  and  demand  must  be 
considered.  On  the  other  hand,  if  the  Italian 
can  obtain  wages  in  New  York  equal  to  ten 
times  what  he  will  receive  in  Italy,  he  will  board 
a  steamer  for  the  United  States,  even  with  the 
expenses  in  New  York  five  times  as  great  as  at 
home.  Such  high  wages  the  Italian  may  always 
obtain  in  America  in  times  of  prosperity,  and 
especially  in  times  just  preceding  the  culmin- 
ation of  a  period  of  prosperity. 

Conversely,  when  this  period  culminates,  the 
demand  for  labor  decreases,  wages  decrease  and 
the    Italian    boards    a    steamer   and    returns   to 


246  BUSINESS  BAROMETERS 

Italy.  Therefore,  as  the  Government  keeps  a 
careful  record  of  when  the  immigrant  enters  the 
country  and  when  he  leaves,  this  report  is  an 
extremely  good  barometer  of  the  labor  condi- 
tions in  the  United  States.  Of  course  under 
almost  any  circumstances  there  are  more  people 
coming  into  a  new  country,  like  the  United 
States,  than  there  are  going  out,  but  the  size  of 
this  excess  number  is  very  sensitive  to  changing 
conditions  in  the  country  as  a  whole. 

By  studying  and  comparing  the  figures  of  the 
past  twenty  years,  it  will  be  seen  that  a  crisis  or 
depression  in  business  conditions  came  very 
soon  after  the  highest  figures  for  immigration 
are  reached.  It  is  likewise  true  that  there  was 
an  improvement  in  business  conditions  when, 
during  a  period  of  depression  and  very  low  tide 
of  immigration,  there  began  to  be  an  increase 
in  immigration.  In  other  words,  very  large 
numbers  of  alien  arrivals  during  a  period  of 
prosperity  may  be  counted  as  one  of  the  factors 
signifying  a  culmination  of  such  a  period  of 
prosperity.  Conversely,  a  steady  increase  in  the 
incoming  steerage  during  a  period  of  depression, 
is  one  of  the  factors  significant  of  beter  busi- 
ness conditions. 

As  is  the  case  with  most  of  the  others  of 
these  subjects  studied  by  bankers  and  merchants, 


IjABOR  conditions  247 

an  increase  does  not  always  mean  the  same  thing, 
neither  does  a  decrease  under  all  circumstances. 
Sometimes  an  increase  is  a  dangerous  sign  and 
sometimes  tells  of  improvement,  and  the  same 
with  a  decrease.  These  things  cannot  be  re- 
duced to  a  rule  of  thumb,  but  the  merchant  must 
use  his  judgment  to  a  certain  extent.  The  rule 
given  above  however,  is  almost  infallible. 

There  is  also  another  reason  why  these  immi- 
gration figures  are  of  interest,  namely:  the 
aliens  leaving  the  country  are  not  only  a  barom- 
eter of  business  conditions,  but  they  also  influ- 
ence the  trend  of  those  conditions.  When  a  for- 
eigner enters  this  country  he  usually  brings  a 
little  money,  for  he  knows  that  he  will  need  a 
place  in  which  to  sleep  while  here  and  must 
have  some  food  and  clothes.  On  the  other  hand, 
when  leaving  the  country  he  takes  from  circula- 
tion a  certain  amount  of  money  which  is  almost 
invariably  many  times  what  he  brings  into  the 
country.  In  addition  he  directly  reduces  the 
income  of  some  landlord  and  the  business  of 
some  small  grocer  and  dealer  in  second-hand 
clothing. 

Therefore  very  large  immigration  figures  dur- 
ing periods  of  prosperity  mean  that  there  are 
many  people  who  will  be  obliged  to  leave  the 


248  BUSINESS  BAROMETERS 

country  as  soon  as  the  period  of  prosperity  cul- 
minates, and  therefore  the  reaction  will  be  great- 
er and  even  more  severe  than  if  they  had  not 
entered  the  country.  In  the  same  way  an  in- 
crease during  a  period  of  depression  not  only 
signifies  better  conditions,  but  these  people  enter- 
ing the  country  are  themselves  the  means  of 
creating  better  conditions  both  by  the  amount 
of  money  which  they  bring  with  them  and  the 
business  which  they  create  after  arriving.  There- 
fore the  necessity  of  tabulating  monthly  figures 
on  immigration. 

The  following  conclusions  are  suggested  rel- 
ative to  immigration  figures. 

These  figures  have  special  bearing  on  the  Con- 
dition of  Labor  in  the  United  States. 

1.  During  a  Period  of  Business  Depression- 

(a)  An  increase  after  a  distinct  decrease 
shows  that  conditions  are  improving. 

(b)  A  continued  decrease  signifies  that  con- 
ditions are  not  as  yet  improving. 

(c)  No  change  signifies  that  conditions  are 
at  a  standstill. 

2.  During  a  Period  of  Improvement  Follozving 

a  Period  of  Business  Depression. 
(a)     An  increase  signifies  that  the  improve- 
ment in  conditions  is  progressing  satisfactorily. 


IMPORTS  OF  MERCHANDISE  249 

(b)  A  decrease  signifies  that  the  improve- 
ment is  temporarily  checked. 

(c)  No  change  signifies  nothing  definite. 

3.  During  a  Period  of  Prosperity. 

(a)  A  great  increase  calls  for  caution. 

(b)  A  decrease  signifies  that  the  corner  is 
being  turned  and  a  reversal  of  conditions  may 
be  expected. 

(c)  No  change  signifies  that  prosperity  may 
be  expected  to  continue  longer. 

4.  During   a  Period   of   Decline   Follozving   a 

Period  of  Prosperity. 

(a)  An  increase  signifies  a  temporary  check 
in  the  decline. 

(b)  A  decrease  signifies  that  conditions  are 
rapidly  becoming  worse. 

(c)  No  change  signifies  nothing  definite. 

Imports   of  Merchandise   Into  the  United 
States 

Connected  with  Fundamental  Statistics  and 
very  closely  related  to  one  another  are  the  three 
following  subjects : 

Imports  of  Merchandise  into  the  United  States. 

Exports  of  Merchandise  into  the  United  States. 

Balance  of  trade  between  the  United  States 
and  foreign  countries. 


250  BUSINESS  BAROMETSaiS 

Each  of  the  three  subjects  is  absolutely  de- 
pendent upon  the  others  and  were  it  not  for  the 
separate  tables  connected  with  each  individual 
subject,  it  would  doubtless  be  simpler  to  treat 
all  three  in  one  comprehensive  section  entitled 
"Imports,  Exports,  Trade  Balances  and  Vol- 
ume." 

Owing,  however,  to  the  fact  that  it  is  abso- 
lutely necessary  for  the  banker  or  merchant  to 
divide  the  figures  into  three  separate  tables  and 
not  allow  them  to  be  combined  in  any  way,  each 
is  here  treated  independently. 

No  detailed  definition  need  be  given  of  the 
imports  of  the  United  States,  except  that  the 
word  import  refers  to  the  valuation  of  the  raw 
material,  manufactured  goods  and  all  other  pro- 
ducts purchased  from  abroad  and  entering 
any  port  or  crossing  any  boundary  of  the  United 
States.  It  may  be  mentioned  also  that  although 
the  figures  published  by  the  Government  are 
correct  for  comparative  purposes,  they  are  of 
themselves  low.  For  this  there  are  two  reasons : 
first,  there  is,  without  doubt,  a  large  quantity 
of  goods  brought  into  this  country  of  which  no 
record  is  ever  made;  and  second,  the  "values" 
are  placed  by  the  importers  at  the  lowest  possi- 
ble figures  in  order  that  the  charge  for  duty 
will  be  as  little  as  possible. 


IMPORTS  OF  MERCHANDISE  251 

(Figures  prior  to  1867  are  given  for  the  fis- 
cal year  ending  June  30.  After  that  year  they 
are  for  the  calendar  year). 

Table  of  U.  S.  Imports 


Year 

Imports 

Per  capita 

i860 

$353,616,119 

$11.25 

1861 

289,310,542 

9.02 

1862 

189,356,677 

5.79 

T863 

243,335,815 

7.29 

1864 

316,447,283 

9.30 

1865 

238,745,580 

6.87 

1866 

434,812,066 

12.26 

1867 

371,476,175 

•  10.23 

1868 

368,006,572 

9.94 

1869 

438,455,894 

11.60 

1870 

461,132,458 

11.97 

187 1 

573,111,099 

14.47 

1872 

655,964,699 

16.15 

1873 

595,248,048 

14.27 

1874 

562,115,907 

13.13 

1875 

503,153,936 

11.43 

1876 

427,347,165 

9-47 

1877 

480,246,300 

10.37 

1878 

431,812,483 

9.07 

1879 

513,602,796 

10.52 

1880 

696,807,176 

13.88 

1881 

670,209,448 

13.06 

252  BUSINESS  BAROfETERS 


Year 

Imports 

Per  capita, 

1882 

752,843,507 

14.36 

1883 

687,066,216 

12.81 

1884 

629,261,860 

11.48 

1885 

585,868,673 

10.49 

1886 

663,429,189 

11-57 

1887 

708,818,478 

12.09 

1888 

725,411,371 

12.11 

1889 

770,521,965 

12.58 

1890 

823,397,726 

13.15 

1891 

828,320,943 

12.96 

1892 

840,930,955 

12.91 

1893 

776,248,924 

11.68 

1894 

676,312,941 

9-97 

1895 

801,669,347 

11.60 

1896 

681,579-556 

9.66 

1897 

742,595,229 

10.32 

1898 

634,964^448 

8.66 

1899 

798,967,410 

10.68 

1900 

829,149,714 

10.86 

190T 

880,419,910 

11-34 

1902 

969,316,870 

12.30 

1903 

995,494,327 

12.42 

1904 

1,035,909,190 

12.71 

1905 

1,179,144,550 

14.24 

1906 

1,320,501,572 

15.69 

1907 

1,434,421,425 

16.55 

1908 

1,116,449,681 

12.85 

IMPORTS  OF  MERCHANDISE  253 

In  studying  the  above  tables  it  is  convenient 
to  refer  to  only  the  "per  capita"  column  which 
shows  very  clearly  the  great  value  of  these  fig- 
ures in  forecasting  a  panic.  At  the  close  of 
the  Civil  War  the  people  were  importing  on  a 
basis  of  about  $io  per  capita  and  this  steadily  in- 
creased to  over  $i6  in  1872.  This  increase  was 
far  above  what  it  should  have  been  and  was 
therefore  naturally  followed  by  the  panic,  which 
came  the  following  year,  namely,  1873.  As  is 
the  case  with  all  panic  years,  the  imports  im- 
mediately dropped  off  from  $16  to  about  $14 
and  steadily  decreased  for  about  five  years. 

Beginning  with  1879  the  imports  again  in- 
creased and  property  likewise  increased  until 
1882,  when  they  again  reached  $14.36  per  cap- 
ita. Although  this  figure  was  not  equal  to 
the  previous  high  figure  for  1872,  yet 
the  rise  was  more  rapid  and  it  is  not 
surprising  that  in  the  latter  part  of  the 
following  year  there  occurred  another  panic, 
namely,  the  panic  of  1883-4.  In  1885,  or  di- 
rectly after  this  panic,  imports  again  dropped 
to  a  minimum  of  $10.49,  t>ut  gradually  increased 
along  the  normal  line  until  they  reached  over 
$13.00  per  capita,  at  which  point  they  remained 
constant  during  1890,  1891  and  1892.  As  could 
readily  have  been  predicted,  these  high  figures 


254  BUSINESS  BAROMETERS 

were  followed  by  another  panic  in  1893.  During 
the  next  year,  as  is  invariably  the  case,  the  im- 
ports again  declined  to  $9.97.  Since  that  time 
they  have  increased  to  a  more  or  less  irregular 
rate  up  to  1907  when  they  again  reached  $16, 
at  which  figure  they  stood  preceding  the  great 
panic  of  1873.  Then  followed  a  sharp  reduction 
to  $12.87,  coincident  with  the  panic  of  1907-08 
and  its  curtailing  of  imported  luxuries.  The  above 
tables  therefore  show  that  the  same  law  has  been 
observed  in  connection  with  all  panics  excepting 
that  of  1903,  which,  as  explained  under  "New 
Securities,"  was  due  to  one  specific  cause  as 
stated  by  Mr.  Morgan;  namely,  "the  congestion 
of  undigested  securities."  Where  the  figures  on 
80%  of  our  subjects  clearly  forecasted  all  pan- 
ics excepting  said  panic  of  1903,  in  only  a  few 
tables  was  the  approach  of  this  panic  indicated; 
On  the  other  hand,  in  these  few  tables,  especially 
the  table  for  "New  Securities  Listed"  and  "New 
Corporations,"  the  increase  was  so  tremendous, 
several  hundred  per  cent-,  that  they  of  them- 
selves were  a  sufficient  danger  signal,  even 
although  the  figures  on  the  other  subjects  ap- 
peared normal. 

In  studying  the  figures  on  imports,  we  see 
that  too  great  an  increase  in  imports  is  a  dan- 
gerous sign.     This  is  due  to  two  reasons:  first, 


IBfPORTS  OF  BIERCHANDISE  25s 

that  it  necessitates  the  exportation  of  too  much 
gold  and  secondly,  that  it  signifies  too  great  an 
extravagance  on  the  part  of  the  American  peo- 
ple. As  continued  exports  of  gold  are  usually 
followed  by  advanced  money  rates,  so  too  great 
an  expenditure  of  money  for  luxuries  and  un- 
productive material,  especially  when  imported, 
is  followed  by  a  period  of  economy  and  repen- 
tance. 

Not  only  are  large  figures  for  imports  sug- 
gestive of  a  panic,  but  small  figures,  especially 
when  they  are  increasing  at  a  slow  and  conserv- 
ative rate,  are  suggestive  of  better  times.  This 
latter  phase  is  especially  well  illustrated  in  an 
article  which  appeared  some  time  ago  in  the 
New  York  Evening  Post.  This  begins  by  re- 
ferring to  a  Wall  Street  man  who  rather  fa- 
cetiously remarked  that  good  times  were  surely 
coming  for  he  noticed  that  people  were  "wearing 
their  old  clothes."  This  remark,  made  careless- 
ly, nevertheless  was  a  statement  of  the  tremen- 
dously important  factor  which  personal  thrift 
becomes  during  a  period  of  depression. 

In  times  of  abounding  prosperity  it  is  easy 
for  people  to  assume  a  contemptuous  attitude 
toward  petty  economies.  The  talk  is  of  m.aking 
money,  not  of  saving  it.  But  a  panic  brings 
out   the   economic   truth   about   the   relation   of 


256  BUSINESS  BAROMETERS 

savings  to  new  business  operations.  ''It  must 
always  be  remembered,"  writes  Lord  Welby, 
commenting  on  an  American  panic  in  the  Con- 
temporary Review,  "that  the  capital  required 
to  extend  business  and  to  open  new  fields  of 
trade  can  only  be  supplied  by  the  savings  of  the 
world : But  there  is  a  limit  to  these  ac- 
cumulations, large  as  they  are.  If  the  passions 
of  the  world,  the  extravagance  of  the  world,  and 
above  all  the  growing  needs  of  the  world  trench 
too  closely  on  the  accumulations  of  the  world, 
financial  stringency  will  inevitably  be  the  result." 
And  it  is  a  fact  that  even  the  most  trivial  form 
of  saving  becomes  a  large  financial  operation 
when  generally  practised. 

How  much  can  the  American  nation  save  by 
each  man  wearing  his  clothes  two  years  instead 
of  one?  The  census  report  of  manufactures 
shows  that  the  factory  product  of  men's  cloth- 
ing during  a  good  year  is  valued  at  about  $375,- 
000,000.  One-third  of  this,  or  considerably  less 
than  one-third  on  the  basis  of  retail  prices,  would 
more  than  equal  the  entire  balance  of  trade  in 
this  country's  favor  in  a  normally  favorable 
month. 

There  are  over  $40,000,000  worth  of  felt  hats 
sold   during   a    good   year.      By   wearing   their 


IMPORTS  OF  MERCHANDISE  257 

felt  hats  5o7o  longer  than  they  have  been  ac- 
customed to  doing,  plain  Americans  can  effect 
a  saving,  in  a  year,  greater  than  the  great  gold 
imports  necessary  to  adjust  conditions  during  a 
critical  period. 

"Yet  it  is  not  always  with  clothes  that  people 
adopt  a  policy  of  retrenchment.  If,  for  example, 
they  cut  down  by  only  one-third  the  amount 
they  spend  on  fresh  beef,  leaving  all  other  items 
on  the  butcher's  bill  unaltered,  the  sum  would 
be  greater  than  twice  the  amount  paid  over  the 
counters  of  the  bank  which  in  October  1907, 
endured  the  longest  "run"  in  the  history  of 
banking  institutions.  Contract  by  the  same  pro- 
portion the  consumption  of  all  kinds  of  meat, — 
and  many  authorities  think  this  would  be  well 
worth  while  from  a  hygienic  point  of  view  alone, 
— and  a  sum  equal  to  the  entire  Government 
surplus  at  the  time  of  the  panic  on  Nov.  i,  1907, 
would  be  saved  in  less  than  ten  months. 

As  to  the  commodities  which  are  classed  as 
real  luxuries,  the  facts  are  equally  striking. 
Enough  cigars  were  "withdrawn  for  consump- 
tion" in  1907  to  provide  about  eight  and  one- 
half  cigars  a  week  for  every  smoker,  on  the 
assumption  that  one-fifth  of  the  total  popula- 
tion,  including   babes    in   arms,   may    fairly   be 


258  BUSINESS  BAROMETERS 

put  down  in  that  class.  Even  for  mere  pur- 
poses of  illustration,  no  one  would  be  cruel 
enough  to  suggest  treating  the  cigars  as  the 
colonists  once  treated  the  tea.  But  in  a  great 
emergency  the  average  smioker  might  consider 
cutting  down  his  allowance  to  one  cigar  a  day. 
That  trifling  act  would  make  a  difference  in 
the  country's  cigar  bill  of  three  and  one-half 
millions  a  year-" 

It  would  of  course  be  a  simple  matter  to 
carry  the  calculation  through  other  departments 
of  production,  but  the  above  suggestions  are 
enough  to  illustrate  this  second  reason  for  tab- 
ulating monthly  figures  on  imports,  as  a  barom- 
eter of  economy.  It  is,  hozuever,  unnecessary 
that  the  monthly  -figures  should  be  tabidated  on 
a  per  capita  basis,  as  the  change  in  population 
is  so  slight. 

Many  merchants  when  studying  foreign  trade, 
instead  of  considering  exports  and  imports  sep- 
arately, add  them  together  and  call  their  sum 
the  volume  of  trade.  This  figure  is  valuable 
as  a  barometer  of  general  business  activity.  It 
should  not  be  confused  with  the  balance  of  trade 
which  is  the  difference  between  exports  and  im- 
ports and  is  watched  by  bankers  for  its  effect 
upon  the  money  rates  and  gold  supply. 


IMPORTS  OF  MERCHANDISE  259 

The  following  conclusions  are  suggested  rel- 
ative to  "Imports." 

(These  figures  are  also  valuable  both  as  a 
barometer  of  the  American  demand  for  luxuries 
and  for  forecasting  money  conditions.) 

1.  During  a  Period  of  Business  Depression. 

(a)  A  normal  increase  signifies  that  con- 
ditions are  improving, — provided  said  increase 
does  not  adversely  effect  the  balance  of  trade. 

(b)  A  decrease  signifies  the  reverse. 

(c)  No  change  signifies  nothing  of  impor- 
tance provided  the  exports  are  likewise  constant. 

2.  During  a  Period  of  Improvement  Follow- 

ing a  Business  Depression. 

(a)  An  increase,  if  not  too  great,  signifies 
that  domestic  trade  is  continuing  to  improve. 

(b)  A  decrease  signifies  that  economy  is 
still  being  practised. 

(c)  No  change  signifies  nothing  of  impor- 
tance, provided  the  exports  are  likewise  con- 
stant. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase,  especially  if  abnormally 
large,  is  a  sign  of  the  end  of  the  period  of  pros- 
perity. 

(b)  A  decrease  tends  to  lengthen  the  period 
of  prosperity. 

(c)  No  change  signifies  nothing  definite. 


260  BUSINESS  BAROMETERS 

4.     During  a  Period  of  Decline  Follozving  a  Per- 
iod of  Prosperity. 

(a)  An  increase  is  an  unfavorable  sign. 

(b)  A  decrease  signifies  that  the  decline  is 
progressing  in  a  healthy  manner. 

(c)  No  change  is  not  a  favorable  sign. 

Exports  of  Merchandise  From  the  United 
States 

By  exports  is  meant  the  goods  shipped  from 
the  United  States  to  any  foreign  port  or  coun- 
try. This  includes  all  raw  materials,  manu- 
factured articles  and  in  fact  anything  for  which 
a  resident  of  the  United  States  receives  money. 

The  monetary  condition  of  the  country  de- 
pends on  three  things: 

1st.     The  amount  of  money  in  the  country. 

2nd.     The  demand  for  money. 

3rd.     The  confidence  of  the  people. 

The  first  item,  namely,  the  amount  of  money 
in  the  country,  is  very  dependent  upon  the  ex- 
ports of  the  country.  Technically,  this  is  de- 
pendent upon  the  balance  of  trade,  a  term  ex- 
plained in  the  next  section  of  this  chapter,  but 
practically  it  is  dependent  upon  the  exports. 

Formerly  the  amount  of  exports  was  depend- 
ent almost  entirely  upon  the  amount  of  raw 
material  produced;  that  is,  wheat,  corn,  cotton, 


EXPORTS  OF  MERCHANDISE  26L 

live  stock,  products,  etc.  The  condition  of  the 
main  crops  of  wheat,  corn,  and  cotton,  as  well 
as  that  of  the  smaller  crops,  such  as  hay,  apples, 
potatoes,  etc.,  determined  the  exports.  With 
small  crops  the  exports  were  very  small,  while 
with  large  crops  the  exports  were  large. 

This  condition,  however,  has  changed  during 
the  past  eighteen  years,  in  which  period  there 
has  been  a  very  great  increase  in  exports.  The 
total  exports  of  the  United  States  have  in- 
creased from  $500,000,000  to  $1,300,000,000,  and 
this  increase  has  been  almost  wholly  in  manu- 
factured products.  In  1890  the  United  States 
was  exporting  about  $140,000,000  in  food  pro- 
ducts and  raw  materials  which  amount  has  in- 
creased only  to  about  $165,000,000  in  1908.  On 
the  other  hand,  the  exports  of  manufactured 
products  have  increased  from  $400,000,000  in 
1890  to  nearly  $1,100,000,000  in  1908. 

It  is  important  to  note  the  change  in  the 
proportions  between  the  agricultural  and  man- 
ufactured exports  for,  if  exports  are  to  depend 
upon  manufactured  articles  rather  than  on  raw 
materials,  bread-stuffs,  etc.,  this  will  tend  to 
eliminate  the  decline  in  exports  which  hereto- 
fore have  occurred  during  years  of  crop  fail- 
ures.    Andrew  Carnegie   says  that  the  time  is 


262  BUSINESS  BAROMETERS 

coming  when  the  greater  part  of  the  raw  mater- 
ials now  forming  the  bulk  of  the  export  figures 
of  this  country  will  be  used  here,  and  their 
place  in  export  trade  will  be  taken  by  maniifac- 
Uired  articles.  Then  the  American  manufacturers 
can  reach  the  markets  of  the  world  and  compete 
therein  with  all  the  other  industrial  and  com- 
mercial nations. 

If  this  is  so,  and  the  figures  for  the  past 
eighteen  years  seem  to  prove  it,  our  exports 
probably  not  only  will  continue  to  increase,  but 
the  fluctuations  will,  as  above  suggested,  be 
much  less  marked.  This  is  another  reason  why 
we  should  carefully  study  the  figures  on  the 
''balance  of  trade,"  rather  than  the  figures  on 
the  "exports"  or  "imports"   exclusively. 

There  is  one  point  in  connection  with  ex- 
ports, however,  that  the  merchant  and  investor 
should  especially  remember,  namely,  that  in  the 
ordinary  course  of  events,  exports  continue  to 
increase  for  some  time  after  a  period  of  depres- 
sion begins,  although  the  proportion  of  exports 
to  imports  decreases.  This  is  due  to  the  fact 
that  the  momentum  of  the  energy  which  in- 
creased production  and  exports  during  the  per- 
iod of  prosperity  itself,  does  not  immediately 
lose  its  force.  Moreover,  the  increase  in  ex- 
ports  usually  continues  until  increased   activity 


EXPORTS  OF  MERCHANDISE  263 

at  home  increases  demand  and  prices,  after 
which  exports  begin  to  diminish.  Therefore, 
during  a  period  of  prosperity,  a  decrease  in  ex- 
ports is  a  dangerous  sign,  as  it  will  tend  to  ad- 
versely affect  the  balance  of  trade.  This  is  also 
true  at  the  beginning  of  a  period  of  depression, 
but  after  a  period  of  depression  has  been  ex- 
isting for  some  time,  then  a  decrease  in  exports 
is  often  a  favorable  sign,  as  it  shows  that  home 
consumption  is  increasing;  therefore  the  neces- 
sity of  systematically  tabulating  the  monthly  fig- 
ures on  exports.  Neither  these  figures,  how- 
ever, nor  the  figures  on  imports  need  to  be 
plotted. 

Many  merchants  when  studying  foreign  trade, 
instead  of  considering  exports  and  imports  sep- 
arately, add  them  together  and  call  their  sum 
the  volume  of  trade.  This  figure  is  valuable  as 
a  barometer  of  general  business  activity.  It 
should  not  be  confused  with  the  balance  of  trade 
which  is  the  difference  between,  exports  and 
imports  and  is  watched  by  bankers  for  its  effect 
upon  the  money  rates  and  gold  supply. 

The  following  conclusions  are  suggested  rel- 
ative to  "Exports"  and  also  relative  to  "Vol- 
ume of  Foreign  Trade": 

(These  figures  are  also  valuable  as  a  barom- 
eter of  foreign  trade  conditions  and  for  fore- 
casting money  rates.) 


264  BUSINESS  BAROMETERS 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  signifies  that  conditions  are 
improving. 

(b)  A  decrease  signifies  continued  dullness- 

(c)  No  change  signifies  that  conditions  are 
at  a  standstill. 

2.  During  a  Period  of  Improvement  Follow- 

ing a  Business  Depression. 

(a)  An  increase  signifies  that  the  improve- 
ment in  conditions  is  progressing  satisfactor- 
ily. 

(b)  A  decrease  signifies  that  the  improve- 
ment has  been  temporarily  checked. 

(c)  No  change  signifies   nothing  definite. 

3.  During  a  Period  of  Prosperity. 

(a)  A  great  increase  calls  for  caution. 

(b)  A  decrease  signifies  that  a  decline  may 
be  expected. 

(c)  Na  change  signifies  nothing  definite. 

4.  During   a    Period   of   Decline   Following  a 

Period  of  Prosperity. 

(a)  An  increase  calls  for  caution. 

(b)  A  decrease  is  normal. 

(c)  No  change  calls  for  further  study. 

Balance  and  Volume  of  Trade 

One  of  the  most  important  of  the  subjects 
that  investors  and  merchants  study  when  an- 
alyzing present  conditions  and  forecasting  future 


BALANCE  OF  TRADE  265 

conditions,  is  the  balance  of  trade.  When  we 
have  sold  to  foreign  merchants  raw  materials 
or  merchandise  greater  in  value  than  that  which 
they  have  sold  to  us,  the  balance  of  trade  is 
said  to  be  in  favor  of  the  United  States  as 
against  foreign  countries.  This  naturally  re- 
sults in  the  shipment  to  America  of  gold,  to 
adjust  the  balance,  or  the  selling  in  the  United 
States  of  "exchange"  at  a  discount,  if  the  con- 
dition is  but  temporary.  The  balance  of  trade 
does  not  akcays  determine  the  debtor  country, 
as  there  are  other  factors  to  be  considered,  but 
as  a  rule  this  is  the  case. 

The  "other  factors"  above  referred  to,  are 
such  factors  as  the  sale  of  American  securities 
abroad  or  the  payment  of  interest  by  the  United 
States  and  corporations  therein  to  foreign  se- 
curity holders.  Although  from  the  bond  deal- 
er's point  of  view  it  is  very  advantageous  to  have 
a  large  and  wide  foreign  market  for  American 
securities,  thus  leaving  so  much  more  "home" 
money  free  for  investments,  yet  it  must  always  be 
remembered  that  each  year  it  may  be  necessary 
to  ship  gold  from  the  United  States  to  pay  the 
interest  on  these  securities  and  that  eventually 
gold  must  be  shipped  to  pay  the  securities  them- 
selves. Mbreover,  the  amount  of  gold  exported 
during  the  year  that  these  securities  are  paid  or 


266  BUSINESS  BAROMETERS 

when  at  any  time  before  they  are  due  the  for- 
eign dealers  decide  to  sell  them,  will  nullify  the 
good  of  a  certain  portion  of  the  trade  balance 
in  our  favor  for  that  year. 

//  trade  balances  were  dependent  ivholly  on 
the  exports  and  imports  of  raw  material,  mer- 
chandise, etc.,  it  would  he  unnecessary  for  mer- 
chants and  investors  to  independently  tabulate 
monthly  -figures  showing  the  balance  of  trade 
in  addition  to  tabulating  monthly  -figures  on 
exports  and  imports.  Owing,  however,  to  these 
additio'nal  factors,  caused  by  the  sale  of  securi- 
ties, payment  of  interest,  etc.,  it  is  necessary  to 
tabulate  independently  figures  on  "Trade  Bal- 
ances-" 

Certain  merchants  when  tabulating  figures  on 
the  balance  of  trade,  which  is  the  difference  be- 
tween the  exports  and  imports,  also  tabu- 
late figures  showing  the  sum  of  the  exports  and 
imports  or  what  is  known  as  the  "volume."  This 
is  wholly  unnecessary  when  the  imports  and 
exports  have  been  tabulated  separately,  but 
rather  is  of  use  simply  as  a  short-cut  to  avoid 
the  necessity  of  tabulating  both  imports  and  ex- 
ports separately.  Therefore,  -figures  on  im- 
ports, exports  and  the  Balance  of  Trade,  zvhen 
tabulated  each  month  serve  as  a  zvonderful  ba- 
rometer for   discerning  present   conditions  and 


BALANCE  OF  TRADE  267 

for    forecasting    future    conditions.      Moreover, 
any   other   figures   are   wholly   superfluous. 

Although  the  foreign  trade  statistics  of  other 
countries  when  properly  compiled  for  compar- 
ative purposes  are  of  interest  to  those  studying  the 
conditions  of  the  United  States,  such  figures  are 
not  conclusive  in  comparing  the  trade  of  two 
different  countries.  As  there  is  no  uniformity 
in  the  classification  in  the  exports  and  imports 
of  two  different  countries  and  as  the  methods 
of  valuation  are  also  entirely  different,  it  is  very 
dangerous  to  make  comparisons  between  the  va- 
rious countries.  This  is  discussed  very  clearly 
in  an  article  on  the  "Comparatability  of  Trade 
Statistics  of  Various  Countries"  by  Sir  A.  E. 
Bateman,  C.  M.  G.,  published  by  the  American 
Statistical  Association,  New  Series  "1893"  Vol. 
3.  page  533. 

The  following  conclusions  are  suggested  rel- 
ative to  the  "Balance  and  Volume  of  Trade." 

(This  is  on  the  assumption  that  the  balance 
is  in  favor  of  the  country  being  studied.     These 
figures  have  special  values  in  judging  the  course 
of  money  rates.) 
I.    During  a  Period  of  Business  Depression 

(a)  An  increase  signifies  that  money  rates 
are  to  become  lower. 

(b)  A  decrease  signifies  the  reverse. 


268  BUSINESS  BAROMETERS 

(c)  No  change  signifies  that  money  rates 
will  depend  wholly  on  domestic  demand. 

2.  During  a  Period   of  Improvement  Follozv- 

ing  a  Period  of  Depression. 

(a)  An  increase  signifies  that  money  rates 
may  continue  to  be  low. 

(b)  A  decrease  signifies  the  reverse. 

(c)  No  change  signifies  that  money  rates 
will  depend  wholly  on  domestic  conditions. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  signifies  that  money  rates 
should  not  become  stringent. 

(b)  A  decrease  signifies  higher  money  rates 
and  a  large  decrease  signifies  the  end  of  the 
period  of  prosperity. 

(c)  No  change  signifies  nothing  of  impor- 
tance. 

4.  During   a    Period   of   Decline   Follozving  a 

Period  of  Prosperity. 

(a)  An  increase  signifies  that  lower  money 
rates  m.ay  be  expected. 

(b)  A  decrease  signifies  the  reverse. 

(c)  No  change  signifies  nothing  of  impor- 
tance. 

Gold  Movements 

"The  natural  movement  of  gold  divides  itself 
readily  into  four  classes.     There  is  in  the  first 


GOLD  MOVEMENTS  269 

place  the  primary  movement  from  the  mines  to 
the  distribution  centers,  London  for  the  Euro- 
pean markets  and  New  York  and  Seattle  for 
the  United  States.  After  that  comes  what  might 
be  called  the  first  distributive  movement  where 
the  gold  arriving,  for  instance,  at  London,  is  n/ 
sold  to  the  highest  bidder,  often  representing 
far  off  countries.  A  readjustment  movement ' 
follows  where  gold,  for  instance,  purchased  by 
Paris  in  London  is  sent  on  to  .Switzerland,  Italy, 
or  Belgium  or  any  other  points.  Lastly  there 
is  a  constant  flow  of  golji  from  one  part  of  the 
world  to  another,  the  movement  which  is  due 
to  the  ancient  causes  of  supply  and  demand,  of 
trade  and  other  balances  to  be  paid,  and  of 
bank  reserves  to  be  built  up  or  released. 

Whatever  schemes  of  international  gold  cer- 
tificates or  of  an  international  clearing  house 
may  be  proposed  by  financial  economists  for  the 
purpose  of  reducing  the  gold  movement,  there 
can  nevei^J)e  any  question  as  to  the  necessity 
of  the  prirP^ry  movement  from  the  mines  to 
the  distributive;  centers.  Roughly  speaking,  the 
world's  gold  production  originates  in  three  great 
sections.  South  Africa,  Australia  and  the  United 
States.  From  the  former  comes  almost  half  of 
the    gold   mined    in   the   world   each   year,   and 


270  BUSINESS  BAROMETERS^ 

therefore  bankers  and  merchants  tabulate  the 
monthly  production  of  the  Rand  Mines. 

The  great  distance  of  these  localities  from 
any  important  financial  market  and  the  fact 
that  most  of  the  stock  of  the  South  African  and 
Australian  gold  mines  is  held  in  England,  makes 
London  the  point  to  which  the  product  of  those 
mines  is  naturally  sent,  so  that  nearly  one-half 
of  the  world's  annual  production  of  gold  comes 
into   the    London   market    for   distribution. 

Arrivals  of  gold  consigned  to  the  London 
agents  of  the  South  African  and  Australian 
mines  are  fully  advertised  and  what  amounts  to 
a  regular  auction  is  held  every  time  a  consign- 
ment arrives.  The  Bank  of  England  is  always 
ready  (must  be,  by  law)  to  purchase  all  gold  of 
standard  fineness  ofifered  to  it,  at  J'j  shillings 
9  pence  per  troy  ounce.  But  very  rarely  does 
the  bank,  or  anyone  else,  secure  bullion  at  this 
price.  Usually  the  bidding  of  the  representa- 
tives of  the  various  banks  puts  the  price  well 
above  that  figure." 

London  is  the  one  free  gold  bullion  market  of 
the  world.  As  the  metal  arrives  from  the  mines 
it  is  sold  to  the  highest  bidder  without  fear  or 
favor.  But  this  process  must  not  be  confused 
with  the  gold  market  maintained  by  the  Bank 
of   England.     Usually   the  bank   will   sell   gold 


GOLD  MOVEMENTS  271 

bars  at  a  price,  but  sometimes  it  will  not,  and 
then  the  cry  goes  up  that  London  is  no  longer 
a  free  gold  market.  As  a  matter  of  fact,  the 
Bank  of  England  is  far  from  being  a  free  gold 
market,  but  the  open  market  is  free  and  as  long 
as  there  is  any  gold  coming  in  the  highest  bid- 
der gets  it. 

In  this  country  on  account  of  our  entirely 
different  currency  law,  there  is  no  bullion  mar- 
ket at  all,  free  or  otherwise,  and  the  primary 
movement  is  direct  from  the  mines  to  the  assay 
offices,  where  a  fixed  and  unvarying  price  is  paid 
for  it.  In  other  words,  all  the  gold  produced  in 
this  country  immediately  passes  into  its  circu- 
lation. There  is  no  long  trip  to  an  open  mar- 
ket, and  then  an  apportionment  to  all  parts  of 
the  world.  The  owner  of  the  gold  takes  it  to  the 
nearest  government  assay  office,  where  it  is  as- 
sayed and  bought  from  him  at  so  much  per 
ounce.  Afterwards  if  anyone  needs  gold  bul- 
lion, for  export  or  other  purposes,  he  can  ob- 
tain it  at  the  treasury  at  a  fixed  price,  as  long 
as  the  supply  holds  out. 

The  very  fact  that  there  is  a  primary  move- 
ment of  gold  from  the  Australian  and  South 
African  mines  to  London,  makes  necessary  the 
distributive  move  to  the  various  markets  whose 
representatives  at  the  British  capitol  have  been 


272  .    BUSINESS  BAROIHETERS 

successful  in  their  bidding  for  this  new  supply. 
But  even  after  that  comes  another  movement, 
for  the  smaller  markets  are  not  directly  represent- 
ed in  London,  but  must  obtain  the  supplies  of  gold 
they  need  through  their  important  correspon- 
dents. 

These  three  movements  carry  the  gold  from 
the  place  where  it  is  mined  to  the  lesser  bank- 
ing centers,  where  its  distribution  is  complete. 
But  the  movement  of  the  metal  by  no  means 
comes  to  an  end  with  its  distribution.  There 
follows  a  fourth  movement,  dependent  entirely 
upon  financial  conditions,  the  movement  which 
will  often  result  in  the  practical  transfer  of  all 
or  part  of  some  firmly  established  gold  supply 
to  some  distant  market. 

There  are  three  prime  influences  which  bring 
about  such  movements.  The  Urst  is  the  neces- 
sity of  making  international  payments  for  mer- 
chandise or  securities  at -times  when  exchange 
is  scarce;  the  second  has  to  do  with  the  main- 
tenance or  restoration  of  bank  reserves  which 
can  at  times  be  accomplished  only  by  the  out- 
right purchase  of  gold  in  other  countries;  the 
third  is  due  to  international  operations  where 
bankers  are  anxious  to  transfer  large  balances 
from  one  point  to  another,  and  not  finding  ex- 
change available  in  quantity,  send  gold  instead. 


GOLD  MOVEMENTS  273 

From  the  very  nature  of  these  causes  it  will 
readily  appear  what  a  mistake  it  is  to  imagine 
that  the  development  of  our  international  fi- 
nancial relations  will  eventually  make  it  neces- 
sary to  ship  gold  at  all.  Only  one  of  them,  the 
first,  could  possibly  be  affected  by  the  arrange- 
ment of  a  system  of  international  credits.  These 
large  payments  by  one  country  to  another,  such, 
for  instance,  as  the  payment  for  the  Panama 
Canal  or  the  payment  to  us  of  the  San  Fran- 
cisco fire  indemnity,  continually  have  to  be 
made,  and  often  under  circumstances  and  at 
times  when  it  is  impossible  that  there  should  be 
a  sufficient  amount  of  exchange  available.  It  is 
hard  to  see  how,  even  if  an  international  sys- 
tem of  crediting  and  debiting  should  be  ar- 
ranged, payments  of  this  kind  could  eventually 
be  settled  by  remittances  of  gold  or  exchange, 
and  as  for  gold  shipments  arranged  for  the 
building  up  or  maintenance  of  bank  reserves, 
it  will  appear  that,  as  the  bankers  of  different 
countries  become  more  closely  allied,  the  inter- 
change of  gold  is  greatly  facilitated.  Through 
various  causes  the  gold  reserve  of  the  banks, 
particularly  the  great  national  banks  of  Eu- 
rope, becomes  depleted  at  times,  and  then  these 
institutions  are  apt  to  call  upon  their  foreign 
connections  to  send  them  the  gold  they  need. 


274  BUSINESS  BAROMETERS 

The  other  reason  which  makes  gold,  often 
apparently  a  settled  reserve,  move  from  one 
country  to  another  is  that  in  the  highly  devel- 
oped state  of  the  foreign  exchange  business,  bal- 
ances are  continually  being  transferred  to  the 
points  where  they  can  be  most  advantageously 
used.  As  long  as  exchange  on  the  point  to  which 
the  transfer  is  to  be  made  can  be  bought  that  will 
be  the  form  of  remittance.  But  where  exchange 
cannot  be  had  gold  will  be  sent,  and  so  it  ap- 
pears that  the  more  balances  transferred,  the 
greater  is  apt  to  be  the  circulation  of  gold." 

The  importing  of  gold  does  not  necessarily 
mean  ''good  times'*  nor  even  ''lower  money  rates" 
nor  the  exporting,  the  approach  of  a  'crisis;  ne- 
vertheless important  deductions  may  he  made  if 
monthly  figures  are  systematically  collected  and 
tabulated  thereon.  These  deductions  have  been 
summarized  by  Burton  as  follows: 

"Every  country  will,  under  normal  conditions, 
have  a  certain  share  of  the  gold  or  primary  sup- 
ply of  the  world.  The  different  countries  have 
been  compared  to  reservoirs  of  water,  of  various 
sizes,  connected  by  pipes.  All  the  reservoirs  will 
maintain  the  same  level.  The  share  of  each 
country  is  determined  primarily  by  its  wealth. 
There  is  a  tendency  for  metallic  money,  which  is 
a  form  of  v/ealth,  to  maintain  in  every  country 


GOIiD  MOVEAfENTS  275 

a  fixed  proportion  to  other  forms  of  wealth. 
But  the  share  of  each  is  affected  by  the  volume 
of  its  trade  and  other  incidental  circumstances, 
among  which  are  established  methods  of  trans- 
acting business,  the  habits  of  its  people,  and, 
notably,  its  currency  system.  The  cur- 
rency system  affects  the  gold  supply. 
Paper  money  displaces  gold,  and  causes  it  to 
be  sent  elsewhere  in  a  less  or  greater  propor- 
tion, according  as  it  is  absolutely  based  upon  a 
deposit  of  gold,  is  redeemable  in  gold  on  pres- 
entation, or  is  not  redeemabte  at  all. 

IMethods  of  transacting  business  influence  the 
supply.  Where  balances  are  largely  settled  at 
clearing  houses,  and  checks  generally  employed, 
less  currency  and  less  gold  are  required.  In 
this  particular,  the  contrast  betwen  England  and 
France  is  very  marked.  The  latter  country 
makes  less  use  of  clearing  houses  and  checks 
and  accordingly  requires  a  larger  supply  of  gold 
and  silver,  the  latter  metal  being  extensively 
used. 

The  habits  of  the  people  exercise  an  impor- 
tant influence.  After  the  Franco-Prussian  War 
it  was  found  that  the  French  peasant  proprie- 
tors had  hoarded  large  sums  of  gold.  In  the 
great  emergency  created,  these  amounts  were 
brought  out  and  assisted  in  the  payment  of  the 


276  BUSINESS  BAROMETERS 

indemnity.  Frequently  when  native  grandees 
in  India  die,  it  appears  that  they  have  been  ac- 
cumulating a  great  stock  of  gold,  much  of  it 
in  the  form  of  ornaments,  which  for  years  has 
been  kept  out  of  circulation.  All  this  hoarding 
tends  to  increase  the  demand  on  the  gold  which 
is  in  circulation  as  money.  The  peasant,  or 
grandee  who  hoards,  causes  so  much  of  the 
world's  capital  to  lie  idle.  The  benefit  accruing 
in  time  of  crisis  or  emergency  to  countries  in 
which  quantities  of  gold  are  withheld  from  gen- 
eral circulation,  is  obtained  at  the  cost  of  di- 
minished activity  and  volume  of  business  under 
ordinary  conditions. 

M.  Paul  Le  Roy-Beaulieu  quotes  figures  to 
show  that  France  in  1885,  had  a  circulation  of 
metallic  money  amounting  to  215  francs  per  cap- 
ita ;  England  and  the  United  States  had,  re- 
spectively, 86  and  68  francs  per  capita.  Of 
course  if  the  quantity  of  coin  in  circulation  had 
been  based  upon  per  capita  wealth  at  the  time, 
England  would  have  shown  the  largest  quan- 
tity per  capita,  France  next  and  the  United 
States  last. 

There  is  then  a  normal  share  of  gold  which 
belongs  to  each  country.  If  any  country  has 
more  than  its  share,  it  will  export.     It  is  easy 


GOLD  MOVEMENTS  277 

to  recognise  that  from  a  gold  producing  coun- 
try, such  as  AustraHa,  South  Africa  or  Alaska, 
the  greater  part  of  the  gold  mined  will  be  ex- 
ported. Likewise,  if  gold  is  held  in  any  one 
country,  in  such  quantity  that  it  can  be  invested 
elsewhere  more  advantageously,  either  in  loans 
or  in  purchases,  or  can  be  sent  abroad  in  pay- 
ment of  debts,  it  will  be  exported.  If  it  is  in- 
vested in  loans  abroad,  it  is  an  indication  of 
surplus  capital,  and  makes  a  favorable  showing. 
If  invested  in  purchases  at  low  prices,  it  shows 
ability  to  draw  upon  other  countries  for  an  in- 
creasing share  of  objects  of  utility.  If  the  pur- 
chases show  that  home  prices  are  higher  than 
foreign,  and  a  supply  of  things  usually  obtained 
at  home  must  be  obtained  abroad,  the  export  of 
gold  is  a  sign  of  danger.  Thus  an  important  ques- 
tion in  determining  the  shipments  of  gold,  is 
the  nature  of  the  purchases  or  investments  to  be 
made  with  it. 

The  specie  exports  and  imports  of  this  coun- 
try have  furnished  distinct  indications  prior  to 
each  period  of  disturbance,  but  their  significance 
cannot  be  understood  without  an  examination 
not  only  of  our  general  situation,  but  also  of  the 
particular  situation  at  different  times." 

Of  the  various  circumstances  under  which  ex- 
cess of  exports  of  gold  indicate  the  approach  of 
a  crisis,  may  be  mentioned  the  following: 


278  BUSINESS  BAROMETERS 

"First,  when  gold  is  required  for  purchases 
abroad  which  are  made  at  high  and  rising  prices. 
This  indicates  overaction  and  concurs  with  un- 
usual increase  in  the  prices  of  domestic  supplies. 
Especially  is  this  true,  if  in  a  time  of  rising 
prices,  gold  is  exported  for  commodities  usually 
supplied  by  domestic  production.  Such  a  condi- 
tion cannot  long  continue  without  a  reaction 
and  an  ensuing  depression,  j  ;The  iindications 
which  are  significant  in  connection  with  the  im- 
ports of  merchandise  apply  to  the  exports  of 
gold.  On  the  other  hand,  the  export  of  gold 
for  purchases,  when  prices  are  low,  is  not  an 
unfavorable  condition.  It  indicates  purchases 
upon  advantageous  terms. 

Second,  when  the  export  of  gold  is  attended 
by  a  scarcity  of  money  and  a  marked  increase 
in  the  rate  of  discount,  it  is  a  decidedly  un- 
favorable indication.  This  is  of  the  same  kind 
as  those  indications  noticed  in  the  conditions  of 
banks.  A  steady  increase  in  the  rate  of  discount, 
or  a  decrease  in  the  supply  of  gold,  is  a  sure 
precursor  of  a  crisis.  The  only  question  is  how 
long  this  condition  can  continue  without  a  crash. 

Third,  an  unusual  balance  of  exports  of  gold, 
not  explained  by  surplus  production,  continued 
for  a  considerable  time,  or  a  sudden  withdrawal 


GOLD  MOVEMENTS  279 

of  large  amounts  is  one  of  the  most  unfavorable 
conditions.  It  is  to  be  noted  that  there  is  an 
exceptional  sensitiveness  in  financial  centres  on 
the  subject  of  gold  exports,  and  sometimes  an 
entirely  normal  export  is  interpreted  as  meaning 
instability  and  destroys  confidence  when  there 
is  no  need  for  distrust. 

It  should  be  added  that,  when  for  a  succession 
of  years  gold  is  withdrawn  from  circulation  by 
reason  of  the  substitution  of  inconvertible  paper 
as  money,  the  conditions  which  exist  are  sure 
to  vary  from  normal  lines.  Credit  will  rest 
upon  a  false  basis  and  the  inevitable  tendency 
will  be  towards  an  increase  in  the  quantity  of 
paper  money  outstanding  and  a  dangerous  ex- 
pansion of  credit. 

In  many  respects  the  phenomena  of  a  balance 
of  gold  exports  are  similar  t  o  those  arising 
from  a  balance  of  merchandise  imports.  The 
two  are  expected  to  appear  contemporaneously, 
but  in  essential  particulars  they  are  different. 
Some  differences  depend  upon  the  question  of 
gold  production. 

In  countries  like  South  Africa  and  a  portion 
of  Australia,  where  gold  mining  is  the  leading 
industry,  gold  exports  are  naturally  classed  with 
merchandise  exports,  and  an  export  is  a  favor- 
able indication.     In  non-producing  countries  like 


280  BUSINESS  BAROMETERS 

England  and  France,  where  gold  is  in  demand 
principally  as  money,  imports  are  a  favorable 
indication.  There  is  another  difference  in  a 
noticeable  tendency  towards  contemporaneous 
decline  in  gold  reserves  in  all  the  great  financial 
centres.  That  which  is  lost  in  one  country  is 
not  gained  in  another.  This  decline  is  explained 
by  the  withdrawal  of  considerable  amounts  to  be 
hoarded  or  retained  in  circulation  outside  of  the 
banks,  and  to  some  extent  to  the  transfer  of 
gold  to  the  countries  outside  of  the  most  ad- 
vanced industrial  and  commercial  circle.  The 
influences  which  cause  gold  to  be  hoarded  or  re- 
tained in  circulation  outside  of  the  banks  are 
not  unlike  those  which  affect  the  circulation  of 
paper  money.  International  credits  or  pay- 
ments frequently  cause  an  excess  of  gold  im- 
ports in  a  country  to  coincide  with  an  excess 
of  imports  of  merchandise.  Again,  a  large  de- 
m.and  for  Imoney,  manifesting  , itself  in  high 
rates  of  interest,  may  cause  gold  to  be  retained 
in  a  country  contemporaneously  with  an  unusual 
balance  of  imports."  Therefore  bankers  and 
merchants  systematically  collect  and  tabulate 
monthly  figures  on  "Gold  Movements-" 

The  following  conclusions  are  suggested  rel- 
ative to  ''Gold  Movements" : 


GOLD  MOVEMENTS  281 

Large  or  long  continued  gold  exports  are  al- 
ways unfavorable  signs  and  gold  imports  are 
always  favorable  signs.  The  following  sugges- 
tions refer  especially  to  exports. 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  always  calls  for  caution,  as 
it  forecasts  an  increase  in  money  rates  and  pos- 
sibly the  calling  of  loans. 

(b)  A  decrease  is  always  favorable,  as  it 
forecasts  lower  money  rates. 

(c)  No  change  is  dangerous  or  favorable 
according  to  whether  gold  is  being  exported  or 
imported. 

2.  During  a  Period  of  Improvement  Following 

A  Period  of  Depression. 

(a)  An. increase  always  calls  for  caution  as 
it  forecasts  an  increase  in  money  rates  and  pos- 
sibly the  calling  of  loans. 

(b)  A  decrease  is  always  favorable,  as  it 
forecasts  lower  m.oney   rates. 

(c)  No  change  is  dangerous  or  favorable, 
according  to  whether  gold  is  being  exported  or 
imported. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  is  especially  dangerous  and 
if  continued  over  a  long  period  often  foretells 
the  end  of  the  period  of  prosperity. 


282  BUSINESS  BAROMETERS 

(b)  A  decrease  is  always  more  favorable 
than  an  increase,  but  any  exportation  of  gold 
should  be  considered  as  unfavorable. 

(c)  The  same  reasoning  applies  to  "no 
change.'' 

4.     During   a   Period   of   Decline   Following   a 

Period  of  Prosperity. 
•    (a)     An  increase  is  still  dangerous  after  the 
turn  and  if  continued  may  precipitate  a  panic. 

(b).  A  decrease  is  the  normal  result  of  a  de- 
crease in  activity. 

(c)  No  change  is  dangerous  or  favorable 
according  to  whether  gold  is  being  exported  or 
imported. 

Foreign  Money  Rates  &  Foreign  Exchange 

These  two  subjects  are  usually  discussed  to- 
getTier,  first  because  they  are  *  co-related  and 
second,  because  the  subject  of  foreign  money 
rates  of  itself  is  not  sufficiently  important  to 
be  treated  independently.  All  that  need  be  said 
as  regards  foreign  money  rates  is  that  money, 
like  water,  seeks  its  own  level,  unless  artificially 
held  or  forced.  Therefore,  if  money  rates  are 
low  in  the  United  States,  but  for  some  time  have 
been  high  in  England,  Germany  or  France,  mon- 
ey rates  in  the  United  States  are  sure  to  soon 
increase,   the   increase   to  be   followed   possibly 


FOREIGN  MONEY  RATES  283 

by  a  period  of  stringency.  There  are  two  reas- 
ons for  this:  first,  the  loans  to  American  bank- 
ers, by  foreign  bankers  will  be  called  for  pay- 
ment, or  else  the  foreign  rate  will  so  be  raised 
that  it  wiTT  be  more  profitable  for  the  Americans 
to  borrow  at  home;  and  second,  foreign  bank- 
ers will  begin  to  borrow  from  America  and  thus 
take  advantage  of  the  lower  American  rates.' 
As  both  of  these  causes  are  in  operation  at  the 
same  time,  the  rates  very  soon  equalize;  the 
foreign  rates  declining  and  the  American  rates 
increasing.  The  converse  of  this  principle  is 
also  true.  When  the  money  rates  in  America 
are  high,  but  the  foreign  rates  have  been  low 
for  some  months,  the  tendency  is  for  the  Amer- 
ican rates  to.  decline  and  the  foreign  rates  to  in- 
crease. 

JVhen  tabulating  foreign  rates,  investors  and 
merchants  consider  only  the  "rate  of  discount'^ 
of  the  three  leading  foreign  hanks;  namely,  the 
Bank  of  England,  the  Bank  of  France  and  the 
Bank  of  Germany.  The  tabulation  and  the  in- 
terpretation of  these  rates  is  very  simple,  es- 
pecially as  the  three  rates  are  usually  added  and 
averaged,  thus  necessitating  the  use  of  only  one 
table.  The  American  merchant  always  keeps  in 
mind,   however,  that  low   foreign   money   rates 


284  BUSIXESS  BAROMETERS 

have  their  disadvantages  as  well  as  their  advan- 
tages, as  very  often  they  signify  a  low  condition 
of  foreign  trade  which,  during  certain  periods, 
may  be  spread  to  America. 

The  changes  in  the  Bank  of  England  rate  in 
recent  years  have  been  as  follows: 

Jan.  14,  1909  3  Apr.  25, 1907  4  Mar.  9, 1905  2iJune  13,  1901  3 

Ma5'  28,1908  2iApr.  11,1907  4^Apr.  21,1904  3june  6,  1901  3i 

Mar.  19,  1908  3  Jan.  17,  1907  5  Apr.  14,  1904  3iFeb.  21,  i9oi4i 

Mar.  s,  1908  3iOct.-i9,  1906-  6  Sept.  3,  1903  4  Feb.  7,  1901  4^ 

Jan.  23,1908  4  Oct.  11,1906  s  June  18,1903  3  Jan.   3,1901  5 

Jan.  16, 1908 
Jan. 

Nov.  ,,^  ,  ,    ^  „,^^  -^   _,  _^_  _,.  _,   __,.,  _^--  ^. 

Nov.  4,  1907  6  Apr.  5,  1905  3iFeb.  3,  1902  3  Jan.  25, 1900  4 


Oct 
Aug 


6,  1908  s  Sept.  13,  1906  4  May  24, 1903  3JJuly    19, 1900  4 

2,  1908  6  June  21,  1906  iiOct.    31,  1902  4  June  14,  1900  3 

7, 1907  7  May    3,  1906  4  Oct.    2,  1902  4     May  24, 1900  3J 

4,  1907  6  Apr.     5,  1905  3iFeb.     3,  1902  3  Jan.    25, 1900  4 

31,1907  siSept.  28, 1905  4  Jan.    23,1902  3ijan.    18,1900  4i 

IS,  1907  4iSept.    7,  1905  3 

Referring  again  to  the  figures,  foreign  money 
rates,  as  affecting  American  money  rates  through 
the  transferring  of  gold,  are  affected  only  by 
the  purchase  and  sale  of  foreign  exchange- 
Therefore,  although  merchants  usually  study 
only  foreign  money  rates  with  their  common 
knov/ledge  of  foreign  exchange,  yet  theoretically, 
a  study  of  foreign  exchange  will  in  itself  suffice. 

Foreign  is  quoted  both  as  to  "actual  rates" 
and  as  to  "quoted  rates"  and  for  a  general  de- 
scription of  the  subject  we  quote  Howard  Irving 
Smith  as  follows: 

"The  quotation  'actual  rate'  means  the  rate  at 
which  exchange  is  sold  in  large  amount  by  the 
dealer;   the   quotation   'posted    rate'    means   the 


FOREIGN  MONEY  RATES  285 

preliminary  asking  rate  of  the  day  before  an 
actual  rate  is  made  and  this  is  the  rate  usually 
exacted  for  a  small  amount  of  exchange  by  a 
dealer.  The  actual  and  posted  rates  are  the 
rates  at  which  dealers  sell  bills  of  exchange 
issued  by  themselves.  They  do  not,  as  a  rule, 
announce  the  rates  at  which  they  will  buy  com- 
mercial bills  of  exchange;  that  is  a  matter  of 
negotiation  and  depends  on  the  nature  of  the 
bills.  The  newspapers,  however,  publish  ap- 
proximate prices  for  commercial  bills. 

Foreign  exchange  is  payable  in  the  money  of 
the  country  upon  which  the  exchange  is  drawn, 
that  is,  where  the  exchange  is  payable.  The 
equivalent  of  $i.oo  in  English  money  is 
49.3  pence  or  four  shillings  1.3  pence. 
When  foreign  exchange  is  quoted  i  n  the 
money  of  the  country  where  it  is  bought,  the 
unit  of  the  money  of  the  country  where  payable 
is  figured  at  so  much  money  of  the  country  where 
the  bill  is  issued.  Thus,  when  sterling  exchange 
is  quoted  at  $48665,  ii  in  exchange  is  worth 
$4.8665. 

When  foreign  exchange  is  quoted  in  money 
of  the  country  where  it  is  payable  (not  where 
it  is  bought)  the  unit  of  money  of  the  country 
where   it  is  bought  is  figured  at  so  much   in 


286  BUSINESS  BAROMETERS 

the  money  of  the  country  where  the  bill  is  pay- 
able. Thus,  when  exchange  on  France  is  quoted 
at  1 8  (5  francs,  18  centimes)  $1.00  in  ex- 
change is  worth  5- 1 8  francs. 

When  a  bill  of  exchange  is  quoted  in  the 
money  of  the  country  in  which  it  is  issued,  but  is 
payable  (is  to  be  paid)  in  the  money  of  the 
country  upon  which  it  is  drawn  (where  it 
is  payable),  the  higher  the  quotation, 
or  rate,  the  higher  is  the  cost  of  such  ex- 
change for  the  reason  that  a  high  rate  requires 
more  of  the  money  of  the  country  where  the  bill 
is  purcheised  to  buy  a  given  amount  of  the  money 
of  the  country  where  the  bill  is  payable  than  a 
low  rate  requires. 

On  the  other  hand,  when  a  bill  of  exchange 
is  quoted  in  the  money  of  the  country  upon 
which  it  is  drawn  (which  is  also  the  money 
in  which  it  is  to  be  paid)  as  francs,  the  higher 
the  quotation  the  less  the  cost  of  such  exchange 
for  the  reason  that  more  (in  the  foreign  coun- 
try's money)  can  be  purchased  for  $1.00  at  a 
high  rate  than  can  be  purchased  at  a  low  rate. 

Illustration:  If  exchange  for  £1  is  purchased 
for  $4.89  it  costs  more  than  if  purchased  at 
$4.84.  On  the  other  hand,  if  exchange  for  25 
francs    (5    francs,    25    centimes)    is    purchased 


FOKEIGX  MONEY  RATES  287 

for  $i.oo  it  costs  less  than  if  $i.oo  is  paid  for 
511  francs;  or,  putting  it  the  other  way,  $1.00 
buys  more  in  francs  at  the  high  rate  than  it 
does  at  the  low  rate. 

The  amount  paid  for  a  time  bill  depends  on 
the  length  of  time  it  is  to  run  and  the  rate  of 
interest  prevailing  in  the  country  where  the 
bill  is  payable.  A  commercial  bill  payable  in 
London  three  months  after  date,  is  bought  by 
a  dealer  in  exchange  in  New  York  at  a  price 
which  is  equal  to  a  bill  payable  on  demand, 
less  than  three  months'  interest  at  the  existing 
rate  of  interest  in  London.  The  London  rate 
of  interest  serves  as  the  basis  in  calculating 
the  price  of  the  bill  for  the  reason  that  the  bill 
is  payable  in  London  and  to  make  it  equal  to 
a  draft  payable  on  demand  it  must  be  discount- 
ed in  London. 

High  cost  for  exchange  ordinarily  means  that 
the  international  balance  is  against  the  countrj- 
where  the  high  cost  prevails ;  conversely,  low 
cost  for  exchange  ordinarily  means  that  the  in- 
ternational balance  is  in  favor  of  the  country 
where  the  low  cost  prevails."  Hon^ever,  as  all 
of  this  may  be  ascertained  by  a  study  of  for- 
eim  money  rates,  it  is  unnecessary  for  the 
merchant  to  collect  or  tabulate  iigures  on  for- 
eign exchange. 


288  BUSINESS  BAROMETERS 

"The  fact  is  that,  so  far  from  financial  panics 
being  confined  to  the  United  States  in  1907,  a 
really  formidable  credit  crisis  occurred  that  year 
in  at  least  four  foreign  cities  situated  in  four 
separate  continents ;  two  of  these  markets  being 
wholly  unconnected  in  a  financial  way  with  the 
United  States ;  and  the  financial  collapse  occur- 
ring in  two  of  them  before,  the  panic  broke  out 
in  our  country  in  October  1907.  As  early  as 
May,  1907,  bank  failures,  hoarding  of  money 
and  very  general  suspension  of  credit  facilities 
were  witnessed  in  Egypt,  and  London  was 
hurrying  along  emergency  shipments  of  gold  to 
Alexandria,  exactly  as  it  hurried  along  the  gold 
shipments  to  New  York  about  six  months  later- 
At  nearly  the  same  time,  bank  failures  and  pan- 
icky conditions  on  the  markets  were  happening 
in  Japan.  In  almost  every  week  of  our  own  Octo- 
ber crisis,  and  on  yet  another  continent,  the  pow- 
erful Banco  Mobiliario  of  Valpariso  suspended' 
payments,  credit  came  to  a  halt  in  Chile,  the 
currency  sank  to  a  low  level  of  depreciation,  and 
the  Chilian  Government  was  forced  to  take 
measures  of  relief.  Again  almost  simultan- 
eously with  our  own  crisis,  panic  broke  out  in 
Hamburg,  Germany,  carrying  down  two  great 
commercial  houses  and  leading  financial  ex- 
perts on  the  spot  to  pronounce  the  crisis  the 
worst  Hamburg  had  witnessed  since  1857. 


FOREIGN  MONEY  RATES  289 

I  hardly  need  add  to  this  list  such  other 
minor  crises  as  the  temporary  breakdown  in 
credit  in  Genoa  in  the  middle  of  1907  and  the 
panic  at  Copenhagen,  a  few  months  after  our 
own,  which  compelled  the  Danish  Government 
to  come  to  the  rescue  by  guaranteeing  the  as- 
sets of  banks  then  subject  to  a  run  by  deposit- 
ors. What  this  part  of  the  history  of  1907  con- 
clusively proves  is  that  financiers  and  historians 
must  look  elsewhere  than  to  American  legislation 
and  American  banking  for  the  cause  of  that 
year's  panic.  European  economic  experts  have 
not  found  it  difficult  to  assign  the  cause;  it 
was  indeed  pointed  out  by  the  eminent  Paris 
economist,  M.  Leroy  Beaulieu,  even  before  the 
panic  came. 

That  cause  was  the  exhaustion,  in  a  violent 
world-wide  industrial  expansion  and  an  even 
more  world-wide  speculation,  of  the  world's  ac- 
cruing capital  resources,  and  a  consequent 
strain  on  credit  which,  throughout  the  fi- 
nancial world,  approached  the  breaking  point. 

With  such  a  tension  in  the  international 
chain  of  credit,  the  break  was  bound  to  come, 
either  where  the  link  was  weakest  or  where  the 
strain  was  greatest.  The  link  was  weakest  in 
Chile  and  Egypt  while  the  strain  was  incal- 
culably the  greatest  in  the  United  States,  where 


290  BUSINESS  BAROMETTEIRS 

Speculation  of  an  unheard  of  rashness  and 
magnitude  had  been  raging  for  two  years, 
although  had  foreign  conditions  been  sound, 
the  break  would  not  have  then  occurred  in  the 
United  States.  The  severity  of  the  shock  in 
all  these  localities,  and  the  world-wide  liquid- 
ation and  reaction,  in  both  finance  and  commerce 
which  have  followed  and  which  still  prevail,  in 
Europe,  Asia,  Africa  and  South  America,  as  well 
as  in  this  country,  were  the  logical  and  inevit- 
able outcome."  Therefore  the  necessity  of  study- 
ing foreign  conditions  and  not  simply  conditions 
in  only  one  country,  is  apparent. 

The  following  conclusions  are  suggested  rel- 
ative to  "  Foreign  Money  Rates." 

These   figures   are   also   of   special   value   in 
judging  the  course  of  domestic  rates. 
1.     During  a  Period   of  Business  Depression. 

(a)  An  increase  in  foreign  money  rates 
signifies  that  conditions  are  becoming  disturbed 
abroad,  that  foreign  rates  are  increasing;  and  as 
foreign  bankers  will  either  mark  up  .or  call  the 
ioans  which  they  hold  of  American  firms,  this 
will  increase  the  home  demand  for  money  and 
domestic  rates  will  strengthen. 

(b)  A  decrease  signifies  the  reverse. 

(c)  No  change  means  normal  conditions. 


POLTTICAli  FACTORS  291 

2.  During  a  Period  of  Improvement  Following 
a  Period  of  ^Depression. 

(a)  An  increase  in  foreign  money  rates  or  in 
foreign  exchange  usually  forecasts  higher  dom- 
estic money  rates. 

(b)  A  decrease  signifies  the  reverse,  pro- 
viding all  other  factors  remain  the  same. 

(c)  No  change  means  normal  conditions. 

3.  During  a    Period  of   Prosperity. 

(a)  An  increase  in  money  rates  or  in  foreign 
exchange  usually  forecasts  higher  domestic 
rates. 

(b)  A  decrease  signifies  the  reverse,  pro- 
viding all  other  factors  remain  constant. 

(c)  No  change  means  normal  conditions. 

4.  During  a  Period  of    Decline    Following    a 
Period  of  Prosperity. 

(a)  An  increase  in  foreign  money  rates  or  in 
foreign  exchange  usually  forecasts  higher  do- 
mestic money  rates. 

(b)  A  decrease  signifies  the  reverse,  pro- 
viding all  other  factors  remain  constant. 

(c)  No  change  means  normal  conditions. 

Political  Factors 
Some  of  the  most  successful  merchants  of  the 
old   school  always  maintained   that  the   three 
greatest  factors  which  influence  business  con- 
ditions are  crops,  money  and  politics,  and  that 


292  BUSINESS  BAROMETERS 

of  these  the  most  important  is  the  last  named, 
politics.  Certainly  this  statement  seems  justi- 
fied by  a  study  of  the  story  of  business  condi- 
tions of  the  United  States.  And  that  portion  of 
American  history  with  which  these  pages  are 
most  concerned,  from  1860  up  to  the  present 
time,  is  most  admirably  described  by  Alex. 
Dana  Noyes  in  his  "  Thirty  Years  of  American 
Finance." 

There  has  always  been  a  most  delicate  re- 
lation between  poHtics  and  the  state  of  trade. 
Almost  every  period  of  depression  and  period  of 
prosperity,  although  not  wholly  due  to  political 
conditions,  has  been  greatly  augmented  by 
them.  Among  those  various  political  factors 
may  be  mentioned  the  following: — 

The  "  Embargo  act  "  in  the  early  part  of  the 
century. 

The  war  of  1812. 

The  establishment  of  the  United  States  Bank. 

The  discontinuance  of  the  United  States 
Bank. 

The  beginning  of  "  state  rights  "  discussions. 

The  slavery  discussion. 

The  Civil  War. 

The  "  Reconstruction  acts." 

The  inflation  of  the  currency. 

The  "  Resumption  Act." 


POLITICAL  FACTORS  293 

The  silver  coinage  law. 

The  resumption  of  specie  movements. 

The  circulation  of  silver  certificates. 

The  radical  measures  under  Pres.  Arthur, 
followed  by  the  panic  of  1884. 

Campaign  and  election  of  the  Republican 
Party  in  1888,  coincident  with  the  period  of 
prosperity. 

The  silver  purchase  act  and  the  great  gold 
exportations  followed  by  the  panic  of  1893. 

The  tariff  legislation  of  the  '90s  followed  by 
the  prosperous  conditions  of  1900. 

The  various  Bryan  scares. 

President  Roosevelt's  campaigns  against  the 
trusts. 

Of  all  these  various  acts,  the  most  dangerous 
were  those  affecting  the  currency  and  the  tariff. 
Both  of  these  are  very  sensitive  questions. 
Any  change  in  the  money  standard  or  banking 
system,  especially  if  it  disturbs  either  foreign  or 
domestic  confidence,  is  very  destructive  to  the 
commercial  prosperity  of  the  country.  Even 
when  banking  questions  or  the  money  standard 
are  discussed  in  Congress,  there  seems  to  be  an 
immediate  division  of  interests  between  the 
producer  or  the  manufacturer  and  the  banker 
or  investor.  The  legislation  desired  by  the 
producer  seems  to  be  opposed  by  the  investor 


294  BUSINESS  BAROMETERS 

and  vice  versa.  The  reason  for  this  is  very 
evident,  as  anything  which  tends  to  make 
money  easier  to  the  producer,  depreciates  the 
value  of  money  in  the  hands  of  the  bankers 
and  investors  who  possess  it.  On  the  other 
hand,  legislation  which  strengthens  the  im- 
portance of  the  banker  and  investor,  tends  to 
handicap   the   producer   and   manufacturer. 

Any  legislation  designed  to  reorganize  the 
banking  system  of  the  United  States  on  any- 
thing but  a  gold  basis,  as  the  banking  systems 
of  England  and  other  countries  are  founded, 
always  retards  trade.  Any  legislation  which 
gives  any  additional  importance  to  gold  is  al- 
ways greeted  with  approval  by  all  classes  of 
manufacturers,  merchants  and  investors,  ex- 
cept those  holding  Government  bonds.  All 
other  legislation,  especially  that  recognizing 
as  a  standard  silver  or  anything  other  than  gold, 
is  always  a  dangerous  sign,  often  causing  bankers 
and  investors  to  call  loans  and  raise  rates. 
Such  conditions  usually  precede  a  general  crisis. 

As  to  the  propriety  of  high  or  low  duties  on 
foreign  goods,  this  is  an  open  question  and 
leading  economists  are  found  on  both  sides. 
Although  nearly  all  bankers  are  in  favor  of  pro- 
tection, yet  most  economists,  on  whose  advice 
the  bankers  depend  regarding  all  other  matters, 


POIilTiCAli  FACTORS  295 

are  almost  without  exception  against  protection ; 
but  whether  high  tariff  for  protection  or  low 
tariff  for  revenue  only,  is  best  for  the  country, 
the  fact  remains  that  whenever  the  subject  is 
discussed  and  whenever  there  is  to  be  a  change 
in  classifications  or  duties,  this  discussion  and 
legislation  has  always  affected  business  con- 
ditions. Moreover,  although  the  adoption  of 
certain  tariff  legislation  has  given  a  great 
impetus  to  prosperity,  yet  the  previous  dis- 
cussion of  the  subject  has  always  tended  to 
disturb  confidence,  promote  a  feeling  of  un- 
certainty   and    seriously    check    business,     ^i 

This  is  very  well  described  by  Henry  Hall 
as  follows:— 

"  In  the  United  States  the  business  world  has 
become  accustomed  to  the  protective  principle; 
and  even  the  prospect  of  reduced  duties  has 
always  chilled  the  spirit  of  enterprise,  while  the 
reality  has  always  given  a  set  back  to  business, 
sooner  or  later.  On  the  other  hand,  enactment 
of  protective  tariff,  in  lieu  of  one  for  revenue 
only,  has  always  proved  exciting  and  has  quick- 
ened into  intense  activity  the  looms,  forges 
and  machinery  of  the  entire  country. 

The  backward  state  of  American  industry 
prior  to  the  Civil  War  is  held  to  have  been  due 
in  large  measure  to  the  relaxation  of  protection 


296  BUSINESS  BAROMETERS 

under  the  tariff  laws  of  1842  and  1857.  There 
can  be  no  question,  that  the  twenty  or  more 
tariff  enactments  from  1861,  when  the  Morrill 
protective  tariff  went  into  operation,  to  1872 
when  the  system  had  been  fairly  adjusted  to  the 
requirements  of  home  industry,  aided  materially 
in  developing  the  mines,  sustaining  the  fac- 
tories against  foreign  competition,  supplying 
the  railroads  with  an  immense  and  profitable 
traffic,  and  promoting  the  farming  interests  of 
every  section  of  the  States. 

The  lower  duties  of  1883  on  many  manufac- 
tures added  to  the  force  of  other  evil  influences, 
which  ended  in  the  crisis  of  1884.  The  crisis 
of  1893  rose  in  a  distinct  measure  from  the 
agitation  in  the  then  Democratic  Congress 
for  a  tariff  for  revenue  only,  which  eventuated 
in  the  Wilson  bill.  The  prosperity  which  the 
States  now  enjoy  must  be  attributed  in  a 
marked  degree  to  the  protective  tariff,  enact- 
ed under  President  McKinley. 

All  writers  on  crises  agree  in  giving  great 
weight  to  tariff  changes.  An  investor  should 
therefore  at  all  times  be  fully  informed  with 
regard  to  such  actual  or  possible  revolutions 
in  political  control  at  Washington,  as  are  likely 
to  have  a  bearing  on  the  tariff  laws." 


POLITICAL  FACTORS  297 

Therefore  successful  hankers,  merchants  and 
investors  always  carefully  watch  political  con- 
ditions and  if  possible  reduce  them  to  a  decimal 
or  barometer  index  number. 

The  following  conclusions  are  suggested  rel- 
ative to  "  Political  Uncertainties." 

(This  assumes  all  political  factors  to  be  un- 
favorable and  the  best  conditions  to  be  when 
only  routine  business  is  being  considered. 
However,  there  are  times  when  certain  political 
acts  are  distinctly  favorable  and  then  the  reverse 
of  the   following  conclusions  should   apply.) 

1.  During    a  Period    of  Business  Depression. 

(a)  An  increase  in  political  agitation  is 
always  unsatisfactory. 

(b)  A  decrease  is  always  welcomed. 

(c)  No  change  is  unfavorable  or  favorable 
according  to  whether  or  not  any  important 
measure  is  under  consideration. 

2.  During   a   Period     of    Improvement     Fol- 
lowing a  Period    of  Depression. 

(a)  An  increase  in  political  agitation  is 
always  unsatisfactory. 

(b)  A   decrease    is    always    welcomed. 

(c)  No  change  is  unfavorable  or  favorable 
according  to  whether  or  not  any  important 
measure   is   under   consideration. 

3.  During    a     Period    of     Prosperity. 


298  BUSDVCSS  BAROMETEIBS 

(a)  An  increase  in  political  agitation  is 
always  unsatisfactory. 

(b)  A    decrease    is    always   welcomed. 

(c)  No  change  is  unfavorable  or  favorable 
according  to  whether  or  not  any  important 
measure  is  under  consideration.  Of  course,  if 
some  legislation  is  under  discussion  the  enact- 
ment of  which  would  greatly  relieve  the  sit- 
uation, then  an  "  increase  "  would  be  distinctly 
favorable,  and  a  decrease  distinctly  unfavorable. 

4.     During  o.    Period  of   Decline   Following    a 
Period  of  Depression. 

(a)  Same  as  above. 

(b)  Same  as  above. 

(c)  Same  as  above 

Production  of  Gold 
As  to  the  effect  of  the  production  of  gold, 
there  is  a  diversity  of  opinion.  That  it  is  a 
subject  of  great  importance  when  a  number  of 
years  are  considered,  is  admitted  by  all;  but 
many  deny  that  it  is  of  such  importance  when 
considering  a  period  of  only'  a  few  years.  The 
theory  that  as  the  supply  of  gold,  which  is  used 
as  a  standard  of  value  and  a  meduim  of  exchange 
increases,  it  must  reduce  interest  rates  and 
increase  prices  of  commodities,  is  actively 
combatted  by  many  authorities.  If  there  were 
no    other    possible    causes    at    work    affecting 


PRODUCTION  OF  GOIiD  2^9 

interest  rates  and  commodity  prices,  this  theory 
might  be  taken  more  seriously;  but  even  then 
it  would  be  obliged  to  stand  the  test  of  experi- 
ence. 

The  editor  of  the  Engineering  and  Mining 
Journal,  Mr.  Walter  R.  Ingalls,  claims  to  have 
shown  by  statistics  and  graphic  diagrams,  that 
there  has  been  no  correspondence  between  the 
fluctuations  in  the  gold  supply  and  those  in 
prices.  Going  back  to  the  time  of  the  first 
notable  modern  increase  in  gold  production, 
he  shows  that  for  some  years,  beginning  with 
1851,  there  was  an  apparent  parallelism,  but 
there  was  a  drop  in  prices  after  the  crisis  of  1857 
and  then  a  recovery  and  increase  until  1864, 
though  the  production  of  gold  was  then  falling 
off.  After  that  prices  declined  until  1870, 
while  the  gold  supply  fluctuated  within  narrow 
limits;  but  in  1871  prices  started  up  again,  with 
gold  production  decHning.  During  the  fall  in 
prices  after  1873,  there  was  an  upward  turn  in 
the  production  of  gold  and  by  a  peculiar  per- 
versity, in  view  of  this  theory  of  cause  and 
effect,  it  fell  off  again  after  1879  as  prices  began 
to  rise.  The  decline  in  gold  production  con- 
tinued until  1883  when  there  was  another 
upward  turn  followed  by  a  continued  increase 
until  1896.     The  out-put  was  then  more  than 


300  BUSINESS  BAROMETERS 

double  that  of  1884  and  the  highest  ever  reached 
before  that  time;  but  during  that  period  there 
was  an  almost  continued  decline  in  commodity- 
prices,  to  contrast  with  the  rise  which  took 
place,  while  the  annual  supply  of  new  gold 
again  doubled.  This  may  not  prove  that  the 
increased  production  of  gold  has  had  no  effect 
upon  its  commercial  value  compared  with  the 
general  mass  of  commodities,  and  consequently 
upon  prices  determined  by  its  value  as  the  stan- 
dard of  measurement  and  computation;  but  it 
does  very  conclusively  refute  the  theory  that 
the  two  things  stand  in  the  close  relation  of 
cause  and  effect.  There  is  certainly  no  close 
correspondence  between  them  from  year  to 
year  and  the  inevitable  inference  is  that  much 
more  potent  causes,  than  the  volume  of  gold 
in  monetary  use,  are  at  work  in  determining  the 
course  of  prices. 

It  is  a  question  whether  the  demand  for  the 
use  of  gold  as  a  basis  of  credit  and  exchange 
has  not  kept  pace  with  the  supply  and  pre- 
vented any  absolute  depreciation.  Mr.  Ingalls 
forcibly  opposes  the  argument  that  the  cost  to 
capital  and  labor  of  producing  gold  has  dimin- 
ished and  that  available  deposits  are  on  the 
increase,  with  cheapening  methods  of  extraction. 
In  connection  with  the  question  of  increased 
demand,    he   takes    the    increasing   production 


PRODUCTION  OF  GOLD  301 

of  pig  iron  as  fairly  representing  the  advance 
made  in  industries  and  trade  generally  and 
shows  both  by  figures  and  graphic  diagrams 
that  its  increase  has  been  relatively  greater 
than  that  of  gold. 

As  to  the  general  subject  of  gold,  this  has 
best  been  presented  in  a  book  entitled  "  The 
Story  of  Gold  "  by  Professor  E.  S.  Meade, 
while  the  theory  that  the  rise  in  commodity 
prices  is  due  to  the  increased  production  of  the 
metal  is  well  described  in  the  book  entitled 
"  Gold  Supply  and  Prosperity,"  edited  by 
Byron  W.  Holt  of  New  York  City,  who  is 
generally  recognised  as  one  of  the  best  informed 
men  on  this  subject.  Based  upon  the  assump- 
tion that  the  output  of  gold  is  to  increase  for  the 
next  ten  years  at  an  average  rate  of  not  less 
than  5%,  Mr.  Holt  makes  the  following  four- 
teen conclusions: — 

(1).  That  the  value  of  gold  will  depreciate 
as  the  quantity  increases,  though  not,  perhaps, 
at  the  same  ratio. 

(2).  That  this  depreciation  will  be  measured 
by  the  rise  in  the  average  price  level. 

(3).  That  rising  prices  will  soon  lead  again 
to  rising  and   higher  interest  rates. 

(4).  That,  because  of  high  interest  rates, 
the  prices  of  bonds  and  most  other  long-time 


302  BUSINESS  BAROMETERS 

obligations  drawing  fixed  rates  of  interest, 
dividends  or  income  will  again  decline  to  low 
levels. 

(5).  That,  because  of  rising  prices  and  high 
interest  rates,  the  cost  of  materials  and  supplies 
will  tend  to  decrease  the  net  profits  of  all  con- 
cerns the  price  of  whose  products  or  services 
either  cannot  be  advanced  at  all  or  are  not  free 
to  advance  rapidly. 

(6).  That,  because  of  rising  prices,  the  net 
profits  of  all  concerns  that  own  their  own 
sources  of  materials  and  supplies  will  tend  to 
increase. 

(7).  That,  because  of  rising  prices  of  com- 
modities, the  market  prices  of  all  tangible 
property  will  tend  to  rise.  This  includes  lands, 
forests,  mines,  buildings  and  improvements. 

(8).  That,  becaue  of  rising  prices  of  com- 
modities and  property,  the  prices  of  the  stocks 
of  corporations  holding  commodities  or  property 
will  tend  to  advance. 

(9).  That,  because  of  rising  prices  and, 
therefore,  of  cost  of  living,  wages  must,  and  will, 
tend  to  advance. 

(10).  That,  because  wages  and  salaries  will 
not  rise  as  much  or  as  fast  as  will  prices  and  the 
■cost  of  living,  there  will  be  dissatisfaction  and 
unrest    among    wage    and    salary    earners. 


PRODUCTION  OF  GOLD  303 

(11).  That,  because  of  rising  prices  and  pro- 
perty, there  will  be  much  speculation  in  com- 
modities, stocks  and  real  estate. 

(12).  That,  because  of  the  great  profits  that 
will  result  from  speculation,  honest  industry 
will  be  discouraged  and  recklessness  and  extrav- 
agance  will   be  encouraged. 

(13).  That,  because  rising  prices  will  decrease 
the  purchasing  power  of  debts,  and  thus  aid 
debtors  at  the  expense  of  creditors,  they  will 
discourage  saving  and  thrift. 

(14).  That,  then,  an  increasing  output  of 
gold  means  rising  prices,  rising  wages,  high 
interest  rates,  the  scaling  of  debts,  speculation, 
unjust  distribution  of  earnings  and  wealth 
and   general   dissatisfaction   and   discontent. 

These  conclusions  seem  to  follow  each  other 
logically,  though  their  close  connection  is  not 
wholly  evident.  The  first  two  conclusions, 
being  the  more  fundamental  and  important, 
Mr.  Holt  discusses  as  follows: — 

"  It  is  almost  inconceivable  that  an  increasing 
supply  and  output  of  gold,  the  standard  and 
measure  of  values,  will  not  tend  to  raise  prices. 

It  is  not  asserted  that  a  slight  increase  in  the 
supply  will  cause  prices  to  advance.  The 
natural  course  of  prices,  especially  of  manufac- 
tured goods,    is    downwards.     To    offset    this 


304  BUSINESS  BAROMETERS 

cheapening  tendency,  due  to  invention  and 
improvement,  an  increase  of  perhaps  2%  a  year 
in  the  supply  of  gold  may  be  necessary.  To 
offset  the  growing  demand  for  gold,  due  to 
industrial  expansion,  an  increase  of  perhaps 
1%    more   a   year   may   be   necessary. 

An  increase  of  perhaps  3%  a  year  in  the 
world's  volume  of  gold,  then,  may  be  necessary 
to  maintain  stable  prices.  This  being  true  a 
smaller  increase  than  3%  will  result  in  declin- 
ing prices  and  a  greater  increase  will  result  in 
advancing  prices  of  commodities.  An  increase 
of  5%  a  year  in  the  supply  of  gold  then  would 
cause  prices  to  rise  an  average  of  2%  a  year,  and 
an  increase  of  8%  in  the  supply  of  gold  would 
cause  prices  to  rise  an  average  of  5%  a  year." 

As  to  whether  Mr.  Holt  or  Mr.  Ingalls,  who 
is  quoted  at  the  beginning  of  this  paper,  is 
correct,  the  reader  must  decide  for  himself. 
It  is  very  generally  admitted  that  a  sudden 
increase  in  the  supply  of  gold  at  certain  times 
does  give  impetus  to  business  activity,  results 
in  the  conception  of  new  ventures  and  indirectly 
is  accompanied  by  an  advance  in  prices.  This 
rising  movement  in  prices  of  itself  encourages 
speculation  and  the  extension  of  credit  to  a 
dangerous  degree.  Large  profits  lead  to  waste 
and  extravagance  which  conditions  are  followed 


PRODUCTION  OF  GOLD  305 

by  a  crisis  and  a  period  of  depression.  Therefore 
it  seems  reasonable  to  admit  that  the  over- 
production of  gold  is  one  factor  causing  in- 
creased prices,  indirectly  affecting  business 
conditions;  but  it  seems  illogical  to  point  to 
the  production  of  gold  as  the  only  factor  or  even 
as  the  most  important  factor  causing  increased 
prices.  The  increase  in  population,  the  de- 
struction of  natural  resources,  industrial  com- 
binations, labor  unions,  increased  cost  of  agri- 
cultural land  and  many  other  factors  tend  to 
increase  the  prices  of  commodities,  as  much  as 
the  over-production  of  gold. 

Nevertheless,  "  Gold  Production  "  is  an  im- 
portant subject  and  most  careful  hankers,  manu- 
facturers and .  merchants  regularly  tabulate  the 
monthly  production  of  the  Rand  mines. 

The  following  conclusions  are  suggested 
relative  to  "  Gold  Production." 

These    figures  have  an  immediate  bearing  on 
all  money  rates  and  a  distant  bearing  upon  the 
price  of  all  commodities  including  money. 
1.     During  cl  Period  of    Business   Depression, 

(a)  A  great  increase  tends  at  first  to  lower 
money  rates,  although  the  later  effect  may  be 
the  reverse. 

(b)  A  great  decrease  tends  to  increase  money 
rates. 


306  BUSINESS  BAROMETTERS 

(c)     No   change   signifies   that   money   rates 
will  be  determined  wholly  by  outside  conditions. 
2.     During  ol  Period  of  Improvement    Following 
a  Period  of  Depressio?t. 

(a)  A  great  increase  tends  at  first  to  lower 
money  rates,  although  the  later  effect  may 
be  the  reverse. 

(b)  A  great  decrease  tends  to  increase 
money  rates. 

(c)  No  change  signifies  that  money  rates 
will  be  determined  wholly  by  outside  conditions. 

3.  During  a  Period  of    Prosperity. 

(a)  A  great  increase  tends  at  first  to  lower 
money  rates,  although  the  later  effect  may 
be  the  reverse. 

(b)  A  great  decrease  tends  to  increase 
money  rates.  . 

(c)  No  change  signifies  that  money  rates 
will  be  determined  wholly  by  outside  conditions. 

4.  During    a    Period    of    Decline    Following 
a    Period  of  Prosperity. 

(a)  A  great  increase  tends  to  lower  money 
rates,  although  the  later  effect  may  be  the 
reverse. 

(b)  A  great  decrease  tends  to  increase 
money  rates. 

(c)  No  change  signifies  that  money  rates 
will  be  determined  wholly  by  outside  conditions. 


BUSIXESS  BAROMETFRS  307 

Commodity  Prices 

One  cannot  do  better,  when  studying  this 
subject  than  to  refer  to  Hon.  Theodore  E. 
Burton's  book  entitled  "Crises  and  Depressions" 
in    which,    among    other    things    he    states: — 

"In  the  season  of  activity  which  precedes  a 
crisis  prices  rise.  This  rise  begins  after  the 
worst  of  the  previous  depression  has  been 
reached.  Attention  has  already  been  called 
to  the  fact  that  the  rise  in  prices  is  unequal  in 
different  commodities.  Iron  and  steel  in  their 
various  forms,  as  well  as  other  commodities 
required  for  construction,  and  those  which 
supply  new  demands  for  consumption,  show 
the  most  striking  increases.  During  a  depres- 
sion prices  of  these  commodities  fall  first  and 
most  notably.  The  prices  of  other  commodities 
do  not  fall  so  much  or  so  early.  In  the  pre- 
ceding season  of  expansion  they  do  not  rise  so 
much,  and,  in  their  rise  as  well  as  in  their  fall, 
they  show,  for  the  most  part,  only  a  remote 
effect  of  the  activity  or  inactivity  of  the  time. 

As  is  well  known  it  is  the  tendency  of  prices 
of  iron  and  steel  to  reach  and  pass  their  max- 
imum some  time  before  the  crisis  occurs, 
though  if  the  crisis  be  precipitated  by  an 
unexpected  failure,   the  interval  wiU  be  short 


308  BUSINESS  BAROMETERS 

or  the  high  prices  may  continue  until  the  very 
outbreak  of  the  crisis.* 

In  the  United  States,  prior  to  the  crisis  of 
September  18,  1873,  a  low  price  level  appeared 
in  almost  all  grades  of  iron  and  steel  in  Jan- 
uary 1871.  This  was  followed  by  a  rapid  and 
almost  unbroken  rise,  culminating  in  the 
months  of  October  and  November  1872.  A 
maximum  price  of  rolled  bar  iron,  $118.72  at 
Philadelphia,  was  reached  in  October,  1872. 
The  price  fell,  with  slight  fluctuarions,  to  $80.64 
in  September  1873,  the  month  of  the  crisis. 

In  the  depression  which  followed  the  crisis 
of  1873,  prices  of  a  majority  of  the  varieties 
of  iron  and  steel  were  lowest  in  the  latter  part 
of  the  year  1878,  though  steel  rails  and  stan- 
dard sections  of  iron  rails  dropped  to  a  mini- 
mum in  the  closing  months  of  1877.  The 
month  of  November  1878  may,  however,  be 
selected  as  the  turning  point.  At  that  date 
No.  1  anthracite  foundry  pig  iron  was  only 
$16.50  per  gross  ton,  less  than  one-third  the 
price  of  September  1872. 


*This  is  why  the  price  of  iron  is  tabulated  each  month 
— as  a  barometer  for  forecasting  changes  in  general  busi- 
ness; although — as  will  be  seen  from  a  chart  in  the  earlier 
part  of  this  book — commodity  prices  do  not  reach  a  mini- 
mum until  one  or  two  years  after  the  stock  market 
reaches  its  low  point. 


COMMODITY  PRICES  309 

In  the  expansion  which  followed  1878,  prices 
reached  their  maximum  in  the  months  of  Jan- 
uary, February  and  March,  1880;  but  the  high- 
est figures  were  maintained  only  for  a  very 
short  time.  Anthracite  foundry  pig-iron, 
which  had  fallen  to  $16.50  in  November  1878, 
rose  to  $41.00  in  February,  1880;  rolled  bar 
iron  to  $85.12  in  the  same  month;  steel  rails 
to  $85;  cut  nails  to  $5.25  in  the  months  of 
February  and  March.  After  the  month  of 
March,  1880,  there  was  a  sharp  decline. 
Although  interrupted  by  numerous  fluctuations, 
a  steady  decline  began  after  the  closing  months 
of  the  year  1882,  and  continued  until  an- 
other minimum  was  reached  in  the  sum.mer 
of  1885.  The  crisis  of  May  1884,  occurred 
in  the  midst  of  this  downward  movement 
and  seem.s  to  have  exerted  but  little  influence 
upon  the  iron  market.  Anthracite  foundry 
pig  iron  fell  to  $17.75  in  the  months  of  June, 
July  and  August  of  1885  and  then  began  to 
rise.  Rolled  bar  iron  fell  to  $40.30  in  May  of 
the  same  year,  and  then  was  quoted  at 
$40.32  for  the  remaining  months  of  the  year. 
Steel  rails  fell  to  $26  in  the  month  of  April. 
*  After  the  minimum  point  in  1885  there  was  an 
upward  movement  continuing  until  the  early 
months  of  1887,  the  months  of  February  and 


310  BUSINESS  BAROMETERS 

March  of  that  year  showing  maximum  prices 
in  most  varieties  of  iron  and  steel;  this  maximum 
was  succeeded  by  a  fall  in  the  prices,  which  for 
most  varieties  reached  a  minimum  in  May  and 
June  1889.  This  minimum  was  followed  for 
a  short  time  by  rising  prices,  which  reached  a 
maximum  in  1890.  In  the  two  decades  after 
the  maximum  prices  of  1880  the  trend  of  prices 
differed  from  that  in  the  preceding  decade. 
Fluctuations  were  much  more  frequent  and 
for  nearly  eighteen  years  the  general  tendency 
was  downward,  though  interrupted  by  brief 
revivals  in  prices  in  the  years  1882,  1886,  1887, 
1890  and  1895.  The  rise  in  price  which  occurred 
in  1887  and  other  years  proved  to  be  greater  than 
the  increased  demand  would  sustain.  The 
general  statement  may  be  made  that  during 
this  long  period  between  1880  and  1897,  in  fact 
until  1898,  for  there  was  only  a  slight  rise  in 
that  year,  and  the  average  price  of  several 
forms  were  less  than  in  1897,  the  demand  did 
not  keep  pace  with  the  increasing  supply,  and 
improvements  in  production  were  constantly 
exerting  their  influence.  The  increase  in  price 
in  the  United  States  in  1887  was  greater  than 
in  other  countries.  The  reason  for  the  difference 
may  be  found  in  the  exceptional  demands  in  the 
year  1887,  for  in  that  year  occurred  the  most 


COMMODITY  PRICES  311 

extensive  railway  building  and  the  greatest 
consumption  of  steel  rails.  There  was  an 
exceptional  deficiency  in  the  home  supply. 
There  was  also  a  revival  of  general  activity  in 
this  country,  the  effect  of  which  was  con- 
spicuous. It  should  be  further  noted  that  the 
crisis  of  this  decade  was  much  less  severe  than 
that  of  1873,  and  the  downward  movement 
succeeding  it,  though  long  continued,  mani- 
fested  less  decline  in   prices. 

After  the  high  prices  of  1890,  there  was  a 
fall  which  continued  until  the  month  of  July, 
1897.  This  fall  was  more  uniform  than  those 
after  1880  and  1887.  It  was  interrupted  only 
by  a  temporary  revival  beginning  after  April, 
1895,  and  continuing  until  the  latter  part  of 
the  year.  Beginning  in  July  1897  prices  showed 
an  upward  tendency,  but  increases  were  slight 
until  the  beginning  of  1899;  then  there  was  a 
very  rapid  rise  until  the  latter  part  of  the  year, 
which  continued  with  the  exception  of  a  very 
slight  setback  in  1903  to  the  depression  of 
1907-8. 

In  the  examination  of  these  price  movements 
several   marked   tendencies   appear: 

(1).  The  interval  between  the  date  of  the 
maximum  prices  and  the  succeeding  crisis  is 
longer  in  the  later  years.  This  interval  con- 
tinued for  a  few  months  prior  to  the  crisis  of 


312  BUSINESS  BAROMETERS 

1825  and  1837,  nearly  a  year  prior  to  that  of 
1873,  and  several  years  prior  to  the  crisis  of 
1884  and  1893.  This  longer  interval  may 
be  explained  by  the  greater  ability  to  carry 
accumulated  stocks  in  expectation  of  a  rise,  the 
larger  influence  of  speculation,  and  the  absorp- 
tion whenever  prices  decline,  of  larger  quan- 
tities by  the  market  now  existing. 

These  influences  explain  another  tendency, 
viz: — 

(2.)  In  later  years  fluctuations  are  more 
frequent.  In  the  period  after  the  downward 
price  movement  has  commenced  the  market 
price  breaks  and  then  is  restored  again.  It  is 
evident  that  abundant  capital  for  construction 
is  waiting  for  investment  and,  even  in  case  of  a 
slight  decline,  purchases  are  large  and  tend  to 
bring  prices"  to  the  former  level. 

(3).  Since  1873  the  maximum  price  reached 
in  each  cycle  tends  to  be  less  than  that  in  the 
preceding  cycle.  This  is  due  to  invention, 
to  the  lower  cost  of  manufacturing  on  a  large 
scale,  and  improvements  of  transportation. 
This  tendency  to  lower  prices  is'  a  part  of  the 
progress  of  the  time  and  an  essential  feature 
in  each  depression. 

(4).  The  upward  movemxent  of  prices  con- 
tinues for  a  much  shorter  time  than  the  down- 
ward movement.  The  upward  movement  pre- 
ceding the  maximum  of  October  and  November 


COMMODITY  PRICES  313 

1872,  continued  for  one  year  and  nine  months. 
The  succeeding  downward  movement  lasted 
until  November  1878,  or  six  years  and  one 
month.  Then  an  upward  movement  continued 
until  February,  1880,  or  one  year  and  three 
months;  the  succeeding  downward  movement 
lasted  approximately  five  and  one  half  years, 
to  the  summer  of  1885,  to  be  followed  by  a 
rising  movement  interrupted  in  the  United 
States  in  1888  and  1889,  of  four  and  one-half 
years,  or  until  January,  1890.  It  is  to  be  no- 
ticed, however,  that  the  rise  in  most  grades  of 
iron  and  steel  for  a  year  after  the  summer  of 
1885  was  very  slight.  After  January,  1890,  the 
downward  movement  continued  for  seven  and 
one  half  years  to  July  1897,  when  prices  for  a 
year  were  almost  stationary,  to  be  followed  by 
rising  prices,  which  continued  until  the  end  of 
1899  or  less  than  a  year  and  a  half. 

(5).  The  rapid  rise  which  precedes  a  maxi- 
mum price  rarely  continues  for  more  than  a  year. 
If  we  take  anthracite  and  Bessemer  pig  iron  as 
the  best  standard,  it  will  be  noticed  that  prior 
to  the  maximum  price  of  anthracite,  September 
1872, prices  rose  from  $37in  January  of  that  year; 
prior  to  the  maximum  of  $41  in  February  1880, 
prices  had  risen  rapidly  from  $20.75  in  August 
1897,  or  for  six  months;  prior  to  the  maximum  of 


314  BUSINESS  BAROMETERS 

$19.90  in  January  1890,  there  was  a  rise  from 
$17  in  May  1889,  or  for  eight  months;  prior  to 
the  maximum  of  $25  for  Bessemer  pig  iron  in 
December  1899,  there  was  a  rapid  rise  from 
$11  in  January  of  the  same  year,  or  for  eleven 
months.  In  many  respects  the  rise  in  1899 
was  the  most  remarkable  of  all,  because  it  had 
been  considered  by  manufacturers  in  the  pre- 
ceding years  that  the  equipment  for  production 
was  sufficient  to  properly  meet  any  increase  of 
demand,  and  yet  the  rapid  rise  in  that  year  was 
unprecedented.  The  great  increase  in  the 
price  of  iron  and  steel  in  that  year,  with  the 
steady  increase  in  production  after  1894,  proves 
the  more  general  use  of  these  products  for  a 
greater  variety  of  purposes  and  over  an  en- 
larged area." 

For  a  general  study  of  prices  the  merchant 
should  select  ten  representative  commodities 
such  as  wheat,  corn,  cotton,  sugar,  pig  iron, 
pork,  copper,  wool,  coffee  and  rubber  and 
tabulate  or  plot  the  wholesale  prices  of  these 
at  regular  intervals. 

It  will  be  noticed  in  studying  general  com- 
modity prices  that  they  do  not  fall  m-aterially 
after  a  year  of  panic,  curtailment  and  depression ; 
for   this   fact   there   are   two   explanations: 


COMMODITY  PRICES  315 

One  of  these  attributes  the  persistence  of 
prices  on  high  levels  to  the  continuous  supply 
of  gold,  which  is  now  being  supplied  at  a  rate 
of  more  than  a  million  dollars  a  day.  The 
other  explanation  finds  the  causes  for  the  effect 
in  question  due  to  several  different  influences 
which  have  characterized  the  industrial  and 
commercial  world  for  fully  a  decade.  It  is 
well  worth  while  setting  over  against  the  single 
item  of  gold  supply  these  other  factors  as  part 
of  the  dynamics  which  have  helped  to  lift 
the  great  plane  of  values  to  the  level  where  it 
has,  with  proper  exceptions  and  limitations, 
persistently   stood    for   the  past   several  years. 

There  are  three  at  least,  if  not  four  substan- 
tial reasons  why  prices  have  risen  so  rapidly 
since  the  opening  of  this  century  and  have 
been  maintained  so  stubbornly. 

First.  The  first  factor  is  the  enormous 
increase  in  the  world's  purchasing  power  aris- 
ing from  the  annual  increment  of  values  in 
the  output  of  mines,  agriculture,  forests  and 
other  extractive  industries.  It  is  figured  con- 
servatively that  in  the  past  ten  years  there 
has  been  taken  out  of  the  earth  and  the  waters 
of  the  United  States  alone  a  sum  of  natural 
values  amounting  to  $90,000,000,000,  as  fol- 
lows: 


316  BUSINESS  BAROMETERS 

Mineral  output  (ten  years) . .  .      $14,000,000,000 
Agricultural    products    (ten 

years)     60,000,000,000 

Lumber  products  (ten  years)        12,000,000,000 
Grazing,    fishing,    etc.,     (ten 

years)     4,000,000,000 

Total  for  decade  in  United 
States     90,000,000,000 

Second.  Another  factor  in  maintaining  high 
prices  is  the  expansion  in  the  geographical  area 
of  productive  enterprise  over  new  territories 
which  during  the  last  decade  have  for  the  first 
time  been  fairly  incorporated  into  the  world's 
market.  Within  this  period  nearly  the  whole 
of  Siberia  has  been  added  to  the  world's  trad- 
ing area,  through  the  enormous  outlay  required 
to  build  the  Trans-Siberia  Railroad.  Every 
foot  of  this  trans-continental  thoroughfare  was 
accompanied  by  the  creation  of  new  demand 
for  commodities,  new  capital  for  development 
and  by  the  manifestation  of  new  power  to 
purchase.  What  was  done  in  Siberia  in  an 
extensive  way  has  also  been  done  in  Japan, 
China,  India,  Egypt,  Australia,  Africa,  South 
America,  Mexico  and  Canada,  since  prices 
began  their  upward  movement  in  1897.  The 
work  of  money,  as  well  as  the  work  of  man 
and  of  his  implements  of  production,   has  all 


C03f3IODITY  PRICES  317 

been  earning  an  increasing  income,  which  al- 
most immediately  manifests^  itself  in  an  ex- 
panding demand  upon  the  industrial  nations 
for   their   output. 

Third.  Thirdly,  the  maintenance  of  high 
prices  is  probably  due  to  the  rise  of  the  standard 
of  living  which  a  decade  of  increasing  wealth 
has  first  produced,  and  then  established  with 
a  resisting  power  that  even  in  times  of  de- 
pression resists  with  a  new  force  any  recession 
in   its   newly   gained   advantages. 

Fourth.  Finally  there  is  a  fourth  factor 
behind  existing  price  levels  in  the  forms  of  the 
wastes  of  wars  and  in  the  millions  of  mis- 
directed capital  which  have  helped  to  enhance 
the  costs  of  profitable  production.  The  power 
behind  high  prices  is  not  the  uplift  of  gold  but 
rather  the  aspiration  of  man,  whether  seen  in 
the  individual's  impulse  to  gain  income  or  in 
large-scale  production  to  control  markets.  Gold 
as  a  dynamic  element  has  its  part,  but  as  a 
measure  of  value  it  is  a  gauge  rather  than  a 
cause." 

Therefore  the  price  of  commodities  is  one  of  the 
best  of  business  barometers  and  all  merchants 
and  bankers  systematically  tabulate  each  month 
the  "  Index  Number "  compiled  by  Bradstreet 
or  others,  supplemented  with  figures  on  the  price 
of  iron  per  ton. 


318  BUSINESS  BAROMETERS 

The  following  conclusions  are  suggested  rel- 
ative  to   "  Commodity   Prices." 

1.  During  a  Period  of  Business  Depression. 

(a)  An  increase  in  commodity  prices  dur- 
ing a  period  of  depression,  after  a  period  of  low 
commodity  prices,  signifies  that  the  depression 
has  come  to  an  end;  but  such  an  increase 
must  be  preceded  by  a  distinct  decrease  to  be 
a  favorable  sign. 

(b)  A  decrease  in  commodity  prices  is  nor- 
mal and  until  said  decrease  no  permanent 
change   for   the   better   can    be   expected. 

(c)  No    change    is    often    unsatisfactory. 

2.  During  a  Period  of  Improvement    Following 
O'   Period  of  Depression. 

(a)  An  increase  following  a  decrease  sig- 
nifies that  the  period  of  improvement  is  pro- 
gressing  satisfactorily. 

(b)  A  decrease  also  signifies  that  the  period 
of    improvement    is    progressing    satisfactorily. 

(c)  No  change  signifies  that  caution  should 
be   used. 

3.     During   a    Period   of  Prosperity. 

(a)  A  great  increase  in  the  commodity  price 
is  one  of  the  signs  of  the  end  of  this  period. 

(b)  A  decrease  is  very  unusual  and  should  be 
carefully  investigated. 

(c)  No  change  signifies  normal  con  ditions. 


CROP  CONDITIONS  319 

4.     During     a     Period    of    Decline    Follow-' 
ing   a   Period    of  Prosperity. 

(a)  An  increase  is  not  unusual  as  com- 
modity prices  usually  continue  to  increase 
about  one  year  after  the  decline  in  stocks 
takes  place. 

(b)  A  decrease  signifies  that  the  period  of 
decline  is  progressing  satisfactorily. 

(c)  No  change  is  normal  at  the  beginning 
of  this  period. 

Crop  Conditions 
This  subject  now  does  not  hold  the  same 
relative  importance  in  the  study  of  Funda- 
mental Statistics,  that  it  held  when  statistics 
on  other  topics  were  less  carefully  compiled. 
But  since  the  full  annual  harvest  of  the  grains 
and  cotton  is  the  one  factor  at  the  bottom  of 
American  business  prosperity,  the  condition 
of  the  standing  crops  will  always  be  interest- 
ing and  valuable  as  a  barometer.  Of  all 
subjects  studied  by  the  merchant  and  investor 
it  is  the  only  one  which  the  Government 
attempts  to  forecast.  Figures  on  banking 
conditions,  labor  conditions,  imports  and 
exports  are  accumulated  by  the  Government 
and  are  valuable  as  a  matter  of  history;  but 
in  none  of  these  subjects  is  there  any  official 
attempt  to  forecast  conditions  or  use  the 
figures  accumulated  for  forecasting  purposes. 


320  BUSINESS  BAROMETERS 

Not  only  does  the  Government  publish  a 
report  on  the  amount  and  condition  of  the 
crops,  in  various  stages  from  planting  to  the 
beginning  of  harvest,  but  it  makes  a  prediction 
for  the  benefit  of  business  interests  of  what  the 
total  crop  is  likely  to  be.  It  has  been  well 
proved  that  this  forecast  made  by  the  Govern- 
ment is  better  than  any  forecast  which*  at 
the  present  time  can  be  made  by  any  asso- 
ciation of  merchants  or  bankers  independently. 

For  this  reason  the  method  of  compiling 
and  distributing  these  forecasts  should^  be 
clearly  understood  and  the  following  is  a 
detailed  explanation  by  Chas.  C.  Clarke, 
of  the   U.   S.   Bureau   of  Statistics.         ^- 

*  There  are  three  divisions  in  the  Bureau 
of  Statistics  of  the  Department  of  Agriculture  : 
the  Division  of  Domestic  Crop  Reports,  the 
Division  of  Foreign  Markets,  and  the  Editorial 
Division  and  Library,  each  of  which  has 
a  chief  of  division  reporting  directly  to  the 
Statistician. 

Statistical  information  concerning  crop  pro- 
duction and  live  stock  that  is  collected  by  the 
slow  and  exact  methods  of  a  census  is  generally 
not  given  to  the  public  until  after  the  crops 
enumerated  are  harvested  and  marketed  and 
the  immediate  interest  in  it  has  passed  away. 


CROP  CONDITIONS  321 

Prices  of  agricultural  products  are  primarily 
governed  by  the  law  of  supply  and  demand; 
therefore  early  information  concerning  the 
supply  is  of  value  to  all.  Those  who  produce 
and  those  who  consume  are  vitally  interested 
as  well  as  the  dealer  who  stands  between  them. 
The  relations  and  mutual  interests  of  agri- 
culture, manufacture,  and  commerce  de- 
mand that  there  should  be  pubHshed  at  brief 
intervals  during  the  crop  season  reliable 
information  on  the  condition,  acreage,  pro- 
duction, and  value  of  the  principal  crops,  by 
States  and  agricultural  areas. 

As  commerce  consists  largely  in  an  exchange 
of  the  products  of  agriculture  and  manufacture 
among  their  respective  producers,  commerce 
thrives  as  the  farmer  and  the  factory  operative 
prosper.  Some  individuals,  however,  do  not 
always  regard  the  common  welfare,  and 
injurious  commercial  speculations  occur  when 
ignorance  prevails  concerning  the  condition 
of  our  crops  and  the  true  relations  of  supply 
and  demand.  At  such  times  the  farmer 
often  does  not  obtain  just  prices,  while  the 
consumer  derives  no  benefit  and  business  is 
injuriously  affected.  The  consequences  of 
false  reports  concerning  the  condition,  and 
prospective  yield  of  the  cotton  crop  alone  may 


311  BUSINESS  baromi:teks 

be  very  injurious.  If  there  were  no  ade- 
quate Government  crop-reporting  service,  and 
by  misleading  reports  speculators  should 
depress  the  price  a  single  cent  per  pound,  the 
growers  would  lose  $60,000,000  or  more;  if  the 
prices  were  improperly  increased,  the  manufac- 
turers and  allied  interests  would  be  affected 
to  a  proportionate  degree.  All  interests  there- 
fore demand  that  the  true  condition  of  crops 
should  be  made  known  promptly,  and  harm- 
ful speculation  discouraged. 

It  was  to  remedy  these  evils  and  to  subserve 
and  protect  the  interests  above  noted  that 
Congress  provided  for  issuing  monthly  crop 
reports.  From  an  allotment  of  a  few  thous- 
and dollars  each  year  at  first,  the  crop  report- 
ing service  has  been  evolved,  perfected,  and 
enlarged  into  the  Bureau  of  Statistics  of  this 
Department,  and  the  total  cost  of  such  ser- 
vice from  its  institution  down  to  date  has 
been  about  three  and  a  half  million  dollars. 
Thus  for  forty-five  years  the  total  cost  of  this 
service  has  been  less  than  one-third  of  the 
amount  required  to  take  the  last  census  of  the 
United  States;  yet  the  consequent  protection 
to  the  farmers  alone  has  been  of  incalculable 
value. 


CROP  CONDITIONS  323 

The  Bureau  of  Statistics  issues  each  month 
detailed  reports  relating  to  agricultural  con- 
ditions throughout  the  United  States,  the 
data  upon  which  these  facts  are  based  being 
obtained  through  a  special  field  service,  a 
corps  of  State  statistical  agents,  and  through 
a  large  body  of  voluntary  correspondents 
composed  of  the  following  classes:  County 
correspondents,  township  correspondents,  in- 
dividual farmers,  and  special  cotton  cor- 
respondents. 

The  special  field  service  is  composed  of  seven- 
teen traveling  agents,  each  assigned  to  report 
for  a  given  group  of  States.  They  are  es- 
pecially qualified  by  statistical  training  and 
practical  knowledge  of  crops.  They  system- 
atically travel  over  the  districts  assigned  to 
them,  carefully  note  the  development  of  each 
crop,  keep  in  touch  with  best  informed  opinion, 
and  render  written  and  telegraphic  reports 
monthly  and  at  such  other  times  as  required. 

There  are  forty-five  State  statistical  agents, 
each  located  in  a  different  State.  Each  of  these 
reports  for  his  State  as  a  whole,  and  maintains 
a  corps  of  correspondents  entirely  independent 
of  those  reporting  directly  to  the  Department 
at  Washington.  These  State  statistical  cor- 
respondents report  each  month  directly  to  the 


324  BUSINESS  BAROMETERS 

State  agent  on  schedules  furnished  him.  These 
reports  are  then  tabulated  and  weighted  ac- 
cording to  the  relative  product  or  area  of  the 
given  crop  in  each  county  represented,  and 
are  summarized  by  the  State  agent,  who  co- 
ordinates and  analyzes  them  in  the  light  of 
his  knowledge  of  conditions  derived  from 
personal  observation  and  other  sources,  and 
prepares  his  monthly  and  other  written  and 
telegraphic  reports  to  the  department. 

There  are  approximately  2,800  counties  of 
agricultural  importance  in  the  United  States. 
In  each  of  these  counties  the  Department  has 
a  principal  county  correspondent  who  main- 
tains an  organization  of  several  assistants. 
These  county  correspondents  are  selected  with 
special  reference  to  their  qualifications  and 
constitute  an  efficient  branch  of  the  crop- 
reporting  service.  They  make  the  county 
the  geographical  unit  of  their  reports,  and  after 
obtaining  data  each  month  from  their  assis- 
tants and  supplementing  these  with  information 
obtained  from  their  own  observation  and  knowl- 
edge, report  directly  to  the  Department 
of  Washington. 

In  the  townships  and  voting  precincts  of  the 
United  States  in  which  farming  operations  are 
extensively    carried    on    the    Department    has 


CROP  COXDITIONS  325 

township  correspondents  who  make  the  town- 
ship or  precinct  the  geographical  basis  of  reports, 
which  they  also  send  directly  to  the  Bureau  of 
Statistics  each  month. 

Finally,  at  the  end  of  the  growing  season 
a  large  number  of  individual  farmers  and  planters 
report  on  the  results  of  their  own  individual 
farming  operations  during  the  year;  and  valu- 
able data  are  also  secured  from  30,000  mills 
and  elevators. 

With  regard  to  cotton,  all  the  information 
secured  from  the  foregoing  sources  is  supple- 
mented by  that  furnished  by  special  cotton 
correspondents,  embracing  a  large  number  of 
persons  intimately  concerned  in  the  cotton 
industry,  and,  in  addition,  inquiries  in  relation 
to  acreage  and  yield  per  acre  of  cotton  are 
addressed  to  the  list  of  cotton  ginners  through 
the  courtesy  of  the  Bureau  of  the  Census. 
.  Eleven  monthly  reports  on  the  principal 
crops  are  received  yearly  from  each  of  the 
special  field  agents,  county  correspondents. 
State  statistical  agents,  and  township  corre- 
spondents, and  one  report  relating  to  the  acre- 
age and  production  of  general  crops  is  received 
during    the    year    from    individual    farmers. 

Six  special  cotton  reports  are  received  dur- 
ing the  growing  season  from  the  special  field 


326  BUSINESS  BAROMETERS 

agents,  from  the  county  correspondents,  from 
the  State  statistical  agents,  and  from  township 
correspondents,  and  the  first  and  last  of  these 
report  relating  to  the  acreage  and  pro-individ- 
ual farmers,  special  correspondents,  and  cotton 
ginners. 

The  general  reports  for  January  and  Feb- 
ruary are  combined  on  one  schedule  and  relate 
to  the  number  and  value  of  farm  animals. 

The  general  report  for  March  relates  to 
the  stock  of  grain  in  farmers'  hands,  the  dis- 
tribution and  consumption  of  corn,  wheat, 
and  oats,  and  the  average  weight  per  bushel 
of  wheat  and   oats. 

Reports  on  the  condition  of  the  crops  of 
the  year  begin  with  the  April  report,  when  the 
condition  of  winter  wheat  and  rye  is  dealt 
with,  prevailing  diseases  of  farm  animals, 
and    losses    from    disease    and    exposure. 

The  report  for  May  comes  at  a  time  when 
few  of  the  crops  are  sufficiently  advanced  for 
their  condition  to  be  reported  upon;  conse- 
quently the  inquiries  relative  to  condition 
apply  only  to  winter  wheat,  rye,  meadow 
mowing  lands,  and  spring  pasture.  This  sched- 
ule also  deals  with  the  portion,  if  any,  of  the 
original  acreage  sown  to  winter  wheat  for  any 
reason   has   been   or   will   be   abandoned,    and 


CROP  CONDITIONS  327 

contains   inquiries   with   regard   to   farm    labor 
and   tenants. 

The  schedule  for  June  deals  with  the  acer- 
age  of  six  crops,  the  most  important  of  which 
is  spring  wheat.  It  also  covers  the  condition 
of  wheat,  oats,  barley,  rye,  clover,  spring 
pastures,    apples,    peaches,    and    rice. 

The  July  schedule  deals  with  the  acreage 
of  corn,  potatoes,  tobacco,  and  sugar  cane; 
the  stocks  of  wheat  in  farmers'  hands;  the 
average  condition  of  all  the  principal  crops, 
fruits,  and  spring  pastures,  and  the  average 
weight   of  wool   per   fleece. 

The  August  schedule  deals  with  the  average 
yield  of  winter  wheat  per  acre,  acreage  of 
buckwheat  and  hay,  the  condition  of  the 
principal  crops,  the  quality  of  clover  hay,  and 
the  stocks   of  oats   in   farmers'   hands 

The  September  schedule  deals  with  the 
condition,  when  harvested  of  wheat,  oats,  bar- 
ley and  rye;  the  acreage  of  clover  seed;  the 
production  of  peaches,  and  the  number  and 
condition  of  stock  hogs  on  hand  for  fattening. 

The  October  schedule  deals  with  the  average 
yield  per  acre  and  the  quality  of  spring  wheat, 
barley,  oats,  rye  and  hops,  and  the  condition 
of  corn,  potatoes,  sugar  cane,  tobacco,  rice  and 
apples. 


328  BUSINESS  BAROMETERS 

The  November  schedule  deals  with  the  aver- 
age yield  per  acre  of  corn,  buckwheat,  potatoes, 
hay,  tobacco  and  rice. 

The  December  schedule  deals  with  the  pro- 
duction and  farm  prices  of  all  the  principal 
crops,  and  the  acreage  of  winter  wheat  and 
rye  sown  for  the  crop  of  the  following  year, 
and  also  with  the  condition  of  winter  wheat 
and  rye. 

In  addition  to  the  foregoing  the  reports 
during  the  past  two  years  have  been  extended 
to  include  condition  figures  of  many  small 
fruits,  vegetables  and  minor  products.  In- 
formation in  regard  to  such  products  has  been 
urgently  requested,  and  as  a  basis  for  com- 
parison has  now  been  satisfactorily  established 
the  reports  are  received  with  interest  and 
favorable  comment. 

Previous  to  the  preparation  and  issuance 
of  the  Bureau's  reports  each  month,  the  cor- 
respondents of  the  several  classes  send  their 
reports  separately  and  independently  to  the 
Department  at  Washington. 

In  order  to  prevent  any  possible  access  to 
reports  which  relate  to  speculative  crops,  and 
to  render  it  absolutely  impossible  for  premature 
information  to  be  derived  from  them,  all  of 
the  reports  from  the  State  statistical  agents,  as 


_  CROP   CONDmOXS  329 

well  as  those  of  the  special  field  agents,  are 
sent  to  the  Secretary  of  Agriculture  in  specially 
prepared  envelopes  addressed  in  red  ink  with 
the  letter  "  A  "  plainly  marked  on  the  ends. 
By  an  arrangement  with  the  postal  authorities 
these  envelopes  are  delivered  to  the  Secretary 
of  Agriculture  in  sealed  mail  pouches.  These 
pouches  are  opened  only  by  the  Secretary  or 
Assistant  Secretary,  and  the  reports,  with 
seals  unbroken,  are  immediately  placed  in 
the  safe  in  the  Secretary's  office,  where  they 
remain  sealed  until  the  morning  of  the  day 
on  which  the  reports  are  issued,  when  they  are 
delivered  to  the  Statistician  by  the  Secretary 
or  the  Assistant  Secretary.  The  com.bination 
for  opening  the  safe  in  which  such  documents 
are  kept  is  known  only  to  the  Secretary  and 
the  Assistant  Secretary  of  Agriculture.  Re- 
ports from  special  field  agents  and  State  statis- 
tical agents  residing  at  points  more  than  500 
miles  from  Washington  are  sent  by  telegraph, 
in  .cipher.  Those  in  regard  to  speculative 
crops  are  addressed  to  the  Secretary  of  Agri- 
culture. 

Reports  from  the  State  statistical  agents  and 
special  field  service  in  relation  to  non-speculative 
crops  are  sent  in  similar  envelopes  marked  "  B," 
which  go  to  the  Bureau  of  Statistics,  and    are 


330  BUSINESS  BAROMETEKS 

kept  securely  In  a  safe  until  the  data  contained 
in  them  are  required  by  the  Statistician  in 
computing  estimates  regarding  the  crops  to 
which  they  relate.  The  reports  from  the 
county  correspondents,  township  correspondents 
and  other  voluntary  agents  are  sent  to  the 
Chief  of  the  Bureau  of  Statistics  by  mail  in 
sealed  envelopes. 

The  plan  of  intrusting  the  final  preparation 
of  reports  to  a  crop-reporting  board  has  been 
continued  during  the  past  year,  and  after  two 
full  years  of  trial  it  has  been  demonstrated 
that  such  is  an  excellent  and  satisfactory 
method.  It  relieves  one  man  of  the  strain 
and  responsibility,  and  secures  the  benefits 
of  consultation  and  a  consensus  of  judgm.ent 
of   men   who   have   been   on   the   ground. 

The  Crop  Reporting  Board  is  composed 
of  the  Chief  of  Bureau  as  chairman,  and  four 
other  members,  whose  services  are  brought 
into  requisition  each  crop-reporting  day  from 
among  the  statisticians  and  officials  of  the 
Bureau,  and  the  special  field  and  State  statistical 
agents  who  are  called  to  Washington  for  the 
purpose. 

The  personnel  of  the  board  is  changed 
each  m.onth.  The  meetings  are  held  in  the 
oifice  of  the  Statistician,  which  is  kept  locked 


CROP    CONDITIONS  331 

during  sessions,  no  one  being  allowed  to  enter 
or  leave  the  room  or  the  Bureau,  and  all  tele- 
phones  being   disconnected. 

When  the  board  has  assembled  reports  and 
telegrams  regarding  speculative  crops  from 
State  and  field  agents,  which  have  been  placed 
unopened  in  a  safe  in  the  office  of  the  Secretary 
of  Agriculture,  are  delivered  by  the  Secretary, 
opened  and  tabulated ;  and  the  reports,  by  States, 
from  the  several  classes  of  correspondents 
and  agents  relating  to  all  crops  dealt  with 
are  brought  together  in  convenient  parallel 
columns  on  final  tabulation  slips;  the  board 
is  thus  provided  with  several  separate  estimates 
covering  each  State  and  each  separate  crop, 
made  independently  by  the  respective  classes 
of  correspondents  and  agents  of  the  Bureau, 
each  reporting  for  a  territory  or  geographical 
unit  with   which   he  is  thoroughly   familiar. 

Abstracts  of  the  weather  condition  reports 
in  relation  to  the  different  crops,  by  States, 
are  also  prepared  from  the  weekly  bulletins 
of  the  Weather  Bureau.  With  all  these  data 
before  the  board,  each  individual  member 
computes  independently,  on  a  separate  sheet 
or  final  computation  slip,  his  own  estimate 
of  the  acreage,  condition,  or  yield  of  each  crop, 


332  BUSINESS  BABOMETERS 

or  of  the  number,  condition,  etc.,  of  farm  ani- 
mals for  each  State  separately.  These  results 
are  then  compared  and  discussed  by  the  board 
under  the  supervision  of  the  chairman,  and  the 
final  figures  for  each  State  are  decided  upon. 
It  has  been  interesting  to  note  how  often  the 
reports  of  the  different  classes  of  correspondents 
and  agents  are  very  nearly  identical  and  how 
closely  the  figures  arrived  at  independently  by 
the  individual  members  of  the  board  agree.  The 
estimates  by  States  as  finally  determined  by 
the  board  are  weighted  by  the  acreage  figures 
for  the  respective  States,  the  result  for  the 
United  States  being  a  true  weighted  average 
for  each  subject. 

There  have  been  eighteen  meetings  of  the 
Crop  Reporting  Board  during  the  past  year, 
in  most  of  which  the  personnel  has  been  changed 
each  month.  Six  special  field  agents,  specialists 
in  their  respective  lines  of  statistical  and  crop 
knowledge,  and  eight  State  statistical  agents 
have  served  in  the  different  board  meetings. 
Many  of  these  men  are  widely  known  through- 
out the  United  States,  and  the  practice  of 
having  them  take  part  in  the  preparation  of 
the  monthly  crop  reports  and  estimates  has 
proved  highly  satisfactory,  and  has  been  a 
great    factor    in    establishing    the    confidence 


CROP   CONDITIONS  333 

of  the  public  generally  throughout  the  country 
in  the  fairness  and  correctness  of  the  Bureau's 
estimates. 

Reports  in  relation  to  cotton,  after  being 
prepared  by  the  Crop  Reporting  Board,  and 
personally  approved  by  the  Secretary  of  Agri- 
culture, are  issued  on  the  second  or  third  day 
of  each  month  during  the  growing  season,  and 
the  reports  relating  to  the  principal  farm  crops 
and  live  stock  are  prepared  and  made  public 
on  the  ninth  or  tenth  day  of  each  month.  In 
order  that  the  information  contained  in  these 
reports  may  be  made  available  simultaneously 
throughout  the  entire  United  States,  they  are 
handed,  at  an  announced  hour  on  report  days, 
to  all  applicants  and  to  the  Western  Union 
Telegraph  Company  and  the  Postal  Telegraph 
Cable  Company,  who  have  branch  offices  in 
the  Department  of  Agriculture,  for  trans- 
mission to  the  exchanges  and  to  the  press. 
These  companies  have  reserved  their  lines  at 
the  designated  time,  and  forward  immediately 
the  figures  of  most  interest.  A  mimeograph  or 
multigraph  statement,  also  containing  such 
estimates  of  condition  or  actual  production, 
together  with  the  corresponding  estimates  of 
former  years  for  comparative  purposes,  is  pre- 
pared   and    sent    immediately    to    exchanges. 


334  BUSINESS  BAROMETERS 

newspaper  publications  and  individuals.  The 
same  afternoon .  printed  cards  containing  the 
essential  facts  concerning  the  most  important 
crops  of  the  report  are  mailed  to  the  77,000 
post-offices  throughout  the  United  States  for 
public  display,  thus  placing  most  valuable  in- 
formation within  the  farmer's  immediate  reach. 

Promptly  after  the  issuing  of  the  report,  it, 
together  with  other  statistical  information  of 
value  to  the  farmer  and  the  country  at  large, 
is  published  in  the  Crop  Reporter,  an  eight- 
page  publication  of  the  Bureau  of  Statistics, 
under  the  authority  of  the  Secretary  of  Agri- 
culture. An  edition  of  over  120,000  copies 
is  distributed  to  the  correspondents  and  other 
interested  parties  throughout  the  United  States 
each  month.  Thus  the  information  is  spread 
broadcast.'' 

As  the  government  crop  statistics  are  neces- 
sary and  valuable  as  business  barometers,  so 
figures  showing  the  production  of  all  commodities 
are  of    intense    interest. 

The  production  of  iron,  for  example  reported 
by  the  two  leading  weekHes  on  the  subject, 
is  a  very  important  factor  in  determining  pres- 
ent conditions  and  forecasting  future  conditions. 
This  was  especially  true  before  the  United 
States  Steel  Corporation  was  formed  and  to  a 


CROP  CONDITIONS  335 

large  extent  is  also  true  today.  Figures  re- 
garding wheat,  corn,  cotton,  iron,  pork,  copper, 
wool,  coffee,  rubber,  sugar  and  other  com- 
modities are  also  of  interest.  A  decrease  in  the 
production  of  commodities  is  always  accom- 
panied by  a  decrease  in  activity,  which  means 
that  men  and  capital  are  idle.  This  reduced 
activity,  if  reduced  beyond  a  certain  point  will 
result  in  a  crisis  followed  by  a  period  of  de- 
pression. 

This  general  principle,  as  especially  applic- 
able to  the  investor,  is  well  presented  by  Mr. 
Henry     Hall    somewhat     as     follows: 

A  large  part  of  the  income  of  all  railroad 
lines  is  derived  from  the  shipment  of  grain, 
produce  and  cotton.  From  6,000,000,000  to 
15,000,000,000  tons  of  these  articles  are  shipped 
by  rail  to  seaboard  cities  every  year,  for  export- 
ation to  other  lands.  A  far  larger  tonnage  is 
moved  by  rail  from  farm  and  plantation  to 
cities  and  other  settlements  of  the  country 
for  home  consumption.  The  contribution  to 
railroad  traffic  from  this  source  always  exceeds 
more  than  30,000,000,000  tons  of  grain,  10,000,- 
000,000  tons  of  flour,  about  3,000,000,000  tons 
of  cotton,  and  a  vast  additional  quantity  of 
potatoes,    tobacco,    fruit    and    other    products 


336  BUSINESS  BAROMETERS 

of  the  harvest.  More  than  once,  in  our  his- 
tory, in  dull  times,  has  a  loss  in  other  earnings 
been  made  good  by  the  transportation  of  agri- 
cultural produce;  and  in  good  times,  bumper 
crops  are  of  enormous  and  direct  value  to  every 
railroad  in  the  land.  I^:^ 

The  productions  of  the  soil  affect  powerfully 
the  prosperity  of  the  United  States  in  another 
way.  Their  money  value  in  a  good  year  is 
almost  bewildering.  The  staple  crops  which 
are  reported  officially  in  its  monthly  statement 
of  acreage  and  conditions  approximate  a  money 
value  of  $3,500,000,000;  and  a  fluctuation  of 
$500,000,000  in  this  immense  total,  which  is 
not  uncommon,  is  felt  at  once  in  the  business 
world.  A  boom  in  stocks  has,  more  than  once, 
originated  in  good  crops.  Depression  has  at 
times    begun    with    a    partial    crop    failure. 

Bountiful  harvests  have  another  and  interest- 
ing effect,  in  that  the  exportable  surplus  en- 
ables the  United  States  to  pay  off  its  borrowing 
of  money  abroad  and  to  create  a  credit,  which, 
if  large  enough,  insures  early  importations  of 
gold.  There  is  no  topic  more  deserving  of 
interested  attention  than  the  state  of  the 
crops.     Another  writer  states: 

"  The  country  requires  an  increase  in  yield 
of  at  least  5%  in  all  its  principal  crops,  cotton 


CROP  CONDITIONS  337 

perhaps  excepted ;  and  in  some  cases  an  increase 
of  at  least  10%  would  be  advisable,  either 
through  larger  acreage  or  better  cultivation. 
This  would  insure  more  reasonable  prices  for 
food  products,  thus  reducing  the  cost  of  living 
about  which  so  much  just  complaint  is  heard. 
It  would  also  stimulate  larger  exports,  the 
decline  of  which  during  the  last  year  has  been 
one  of  the  most  unfortunate  accompaniments 
of  our  business  depression.  Larger  exports 
of  agricultural  products  would  do  more  than 
anything  else  toward  restoring  the  equilibrium 
of  our  foreign  trade  and  would  stimulate 
business   at  home." 

The  profits,  and  therefore  the  stocks  of 
railroad  conipanies  which  operate  through  the 
grain  and  cotton  sections,  are  affected  in  the 
most  direct  and  powerful  manner  by  the  prom- 
ise of  generous  or  stunted  crops;  and' as  they 
go,  so  goes  the  market.  Investors  need  to 
keep  in  touch  with  the  crop  outlook.  Wall 
Street  always  discounts  the  future  and  never 
waits  for  earnings  to  be  affected  actually 
before  adjusting  prices  to  what  it  sees  coming. 

A  slackening  of  trade  in  the  street  after  a 
great  boom  precedes  every  financial  crisis;  and 
every  investor  must  be  as  alert  to  detect  the 
signs  of  a  coming  change  of  importance  as  are 


338  BUSINESS  BAROMETERS 

the  bankers,  rich  men  and  stock  operators, 
upon  whom  the  fortunes  of  the  stock  market 
depend. 

It  is  axiomatic  that  all  railroads  are  affected 
directly  and  seriously  by  crop  conditions, 
and  industrial  stocks  peculiarly  so.  Therefore 
the  subject  of  "  Crops  "  is  one  which  requires 
constant  attention,  and  never  more  so  than 
when  a  boom  or  a  reaction  has  run  on  for  a 
number  of  months,  or  years.  Conservative 
merchants  and  investors  therefore  tabulate  each 
month  when  published  the  Government  Estimate 
of  the  wheat,  corn  and  cotton  crops,  then  in  the 
ground,  together  with  the  annuual  figures  when 
the  crops   have   been   harvested. 

The  following  conclusions  are  suggested  rel- 
ative to  "Crops  and  other  Commodities": 

(The  condition  of  the  crops  has  direct  bear- 
ing upon  the  condition  of  the  farmer,  and  an 
indirect  interest  for  every  investor  and  mer- 
chant.) 

1.  During  a  Period  of  Business  De- 
pression. 

(a)  Improved  crop  conditions  are  often  the 
beginning   of   a   period   of   improvement. 

(b)  Poorer  crop  conditions  delay  an  im- 
provement  in    general    business. 


CROP   CONDITIONS  339 

(c)  No  change  is  favorable  or  unfavorable 
according  to  whether  this  means  good  crops 
or  otherwise. 

2.  During  cl  Period   of   Improvement  Following 
O'   Period  of  Depression 

(a)  Improved  crop  conditions  always  give 
an  impetus  to  the  general  improvement  in 
conditions. 

(b)  Poorer  crop  conditions  always  retard 
the  improvement. 

(c)  No  change  is  favorable  or  unfavorable 
according   to   what   it   represents. 

3.  During    cl    Period    of    Prosperity. 

(a)  Improved  crop  conditions  tend  to 
lengthen  the  period  of  prosperity. 

(b)  Poor  crop  conditions  tend  to  shorten 
said     period. 

(c)  No  change  is  favorable  or  unfavorable 
according  to  what  it  represents. 

4.  During''  a     Period    of     Decline  Following 
^  Period  of  Prosperity. 

(a)  Improved  crop  conditions  tend  to 
forestall  a  panic  or  delay  "  the  day  of  reckon- 
ing." 

(b)  Poor  crop  conditions  tend  to  hasten 
said   time  and   perhaps  cause   a   panic. 

(c)  No  change  is  or  is  not  of  importance 
according    to    what    it    represents. 


340  BUSINESS  BAROMETERS 

Railroad  Earnings 

Railroad  earnings  are  of  interest  for  two 
reasons:  firsts  for  forecasting  the  conditions 
of  the  railroads,  upon  which  the  prices  of  se- 
curities are  directly  dependent;  secondly,  for 
determining  and  forecasting  the  condition  .  of 
general  business. 

Although  stocks  of  roads  barely  earning 
their  operating  expenses  and  interest  charges, 
are  of  some  nominal  value  simply  on  account 
of  their  voting  power  (and  this  value  is  gen- 
erally considered  in  the  vicinity  of  about  $10 
per  share,  par  value  $100)  yet  railroad  stocks 
as  a  rule  are  worth  very  little  unless  the  road 
is  earning  money.  But  whether  or  not  a 
stock  pays  a  dividend,  it  is  self-evident  that 
the  prices  must  vary  as  the  earning  power. 
Increased  earnings  forecast  higher  prices  for 
the  securities  and  reduced  earnings  forecast 
lower  prices.  Manipulation  may  temporarily 
force  stocks  far  above  or  far  below  their  true 
investment  value,  but  neither  high  prices  nor 
low  prices  can  artificially  be  maintained  for 
long.  '  In  the  end  the  prices  must  adjust  them- 
selves according  to  earnings.  As  most  invest- 
ments are  either  directly  or  indirectly  in  the 
form  of  railroad  securities,  railroad  earnings  are 
of  great  importance  to  the  investor. 


RAILROAD    EARNINGS  341 

For  the  purpose  of  forecasting  general  business 
conditions,  these  earnings  are  also  of  great 
interest.  As  statistics  they  are  so  important 
for  this  purpose  that  many  merchants  consider 
only  bank  clearings  in  addition  to  railroad 
earnings  in  making  up  a  barometer  of  actual 
business  conditions.  There  are  several  reasons 
for  this  choice,  of  which  the  two  following 
are . especially  well  founded: 

(1).  Because  nearly  all  bills  are  paid  in 
checks,  bank  clearings  serve  as  a  barometer 
of  the  total  amount  of  sales;  but  railroad 
earnings  likewise  serve  as  a  similar  barometer, 
because  practically  all  goods  purchased  or 
sold  are  shipped  on  the  railroads.  If  the  freight 
earnings  of  the  United  States  show  an  increase, 
it  is  very  evident  that  manufacturing  and 
commerce  is  increasing;  and  the  same  is  true 
conversely,  if  the  freight  earnings  are  decresising. 
Therefore  the  earnings  of  the  railroads  may  be 
considered  in  the  same  manner  as  the  clearings 
of  the  banks. 

(2).  Another  important  reason  is  that  not 
only  are  railroad  conditions  a  barometer  of 
trade  conditions,  but  to  a  large  extent  they  are 
the  basis  of  general  trade  conditions.  This  is 
due  to  the  fact  that  the  railroads  employ  so 


342  BUSINESS  BAROMETERS 

large  a  proportion  of  the  working  class  pop- 
ulation of  the  United  States,  and  that  so  many 
industries  are  absolutely  dependent  on  the 
railroads  for  their  business.  The  railroads 
are  the  best  purchasers  of  contractors'  supplies 
and  contract  labor;  of  iron  and  steel  for  rails 
and  bridges;  of  lumber,  for  ties  and  stations; 
of  coal  for  motive  power  and  heating;  of  oil  for 
lighting  and  lubricating;  of  printer's  supplies 
for  time-tables,  tickets,  etc.  etc.  In  fact  this 
list  might  be  indefinitely  extended  to  show  that 
the  prosperity  of  the  country  is  inseparably 
connected  with  the  prosperity  of  the  railroads. 

Therefore,  for  the  above  two  reasons,  the 
wise  investor  and  merchant  very  carefully 
watches  railroad  earnings,  both  for  deter- 
mining the  present  conditions  and  for  forecast- 
ing future  conditions.  In  this  connection  the 
history  of  railroad  earnings  during  the  past 
three  depressions  may  be  of  interest.  During 
the  reaction  of  1873  the  high  level  of  gross 
earnings  was  reached  in  the  same  calendar 
year  as  the  panic  itself,  but  the  recession  from 
this  high  point  was  fairly  evenly  spread  over 
the  next  four  years.  The  recovery,  on  the 
contrary,  was  strikingly  rapid.  In  1879,  only 
two  years  after  gross  earnings  had  been  at 
their  worst,  they  made  a  new  high  record. 


RAILROAD   EARNINGS  343 

By  reducing  "  maintenance  charges "  the 
net  earnings  increased  for  a  year  after  the 
reaction  began,  the  gain  between  1873  and 
1874  having  been  almost  four  per  cent.  There- 
after net  earnings  declined  along  with  the 
gross,  to  their  low  level  in  1877.  In  the  follow- 
ing two  years  they  recovered  even  more  rapidly 
than  gross  earnings,  making  up  most  of  their 
lost  ground  in  one  year.  The  reaction  between 
the  top  and  bottom  levels  in  net  e*arning  was 
practically  10%  but  between  the  two  years  in 
which  the  gross  receipts  sank  from  top  to 
bottom  levels  the  difference  in  net  was  con- 
siderably less.  Moreover  this  decrease  was 
accompanied  by  an  increase  in  mileage  of 
nearly  12%. 

While  the  panic  of  1873  severely  checked 
railroad  construction,  it  by  no  means  checked 
such  development  altogether.  This  crisis  fol- 
lowed one  of  the  most  pronounced  waves  of 
railroad  construction  ever  witnessed.  In  two 
years  preceding  the  panic,  operated  mileage 
increased  by  21,600  miles,  or  48%,  which  of 
course    is   always   a   distinct   danger   signal. 

The  next  depression  of  1884-5  shows  a  dif- 
ference from  other  depressions  in  relation  of 
operating  expenses  to  volume  of  business. 
Thus  in   1894,   the  percentage  decline  in   net 


344  BUSINESS  BAROMETERS 

earnings  was  a  trifle  less  than  that  of  gross; 
but  in  the  '80's  the  lessening  volume  of  traffic 
was  not  accompanied  by  a  proportionate  re- 
duction in  earnings.  The  comparison  of  top 
and  bottom  levels  in  this  depression  follows: 

Mileage  Gross  Net 

1883  ...  106,938  $807,112,780  $291,587,588 
1885  ...  123,320  772,567,883  269,493,931 
Decrease  *16,382  34,543,897  22,093,657 
Percent. 15. 3  4.2  7.5 

In  so  serious  a  crisis  as  that  of  the  '90's  the 
maximum  reaction  in  railroad  earnings  was 
not  more  than  12%.  However,  aggregate 
figures  covering  so  many  railroads  of  such 
wide  diversity  of  location  and  condition,  tend 
to  obscure  the  facts  as  they  apply  to  individual 
undertakings.  Constant  addition  of  new  mile- 
age tends  to  reduce  the  record  of  damage 
sustained  by  the  old  roads.  The  reduction 
of  the  figure  to  a  mileage  basis  would  still 
be  an  inaccurate  test  because  the  earning 
power  of  new  and  additional  mileage  is  naturally 
low.  Furthermore,  construction  of  new  roads 
frequently  takes  away  business  from  those 
roads  already  in  existence,  and  thus  tends  to 
lower  the  average  earnings  per  mJle,  without 
any  actual  decrease  in  the  amount  of  business. 


RAILROAD   EARNINGS  345 

A  comparison  between  fat  and  lean  years  could 
best  be  made  by  using  figures  for  identical 
mileage. 

Aggregate  railroad  earnings  reached  a  new- 
high  level  in  1893  and  again  acted  as  a  distinct 
danger  signal,  for  the  crisis  itself  took  place  in 
the  second  half  of  that  calendar  year.  The 
reaction  in  general  business  came  the  next 
year,  when  both  gross  and  net  immediately 
reached  the  low  level  of  that  movement.  The 
recovery,  though  slow,  was  fairly  continuous 
throughout  five  or  six  succeeding  years.  The 
extent  of  the  reaction  from  the  top  level  of  1893 
to  the  bottom  level  of  1894  is  shown  in  the  fol- 
lowing figures: 
Mileage  Gross  Net 

1893  .    175,441     $1,207,106,626    $358,648,918 

1894  .  178,054  1,066,943,358  317,757,399 
Decrease  *2,613  140,163,268  40,891,519 
Percent        1.5  11.6  11.4 

1907  .    222,635       2,603,757,503      833,339,600 

1908  .    228,188     *2,378,000,000 

*  Estimate  of  The  Boston  News  Bureau. 

The  next  high  point  was  reached  in  1907,  when 
the  aggregate  mileage  increased  to  222,635,  the 
aggregate  gross  to  $2,602,757,503  and  the 
aggregate  net  to  $833,339,600.  This  gross 
and  net  fell  off  simultaneously  with  the  decrease 


346  BrSINESS  BAROMETERS 

in  business,^  an  aggregate  total  of  about  9%, 
the  low  point  having  been  reached  in  the  latter 
part  of  the  summer  of  1908.  Since  that 
time  there  has  been  a  gradual  improvement. 

//  therefore  is  advisable  for  merchants  and 
investors  to  select  about  ten  large  roads,  operat- 
ing in  different  parts  of  the  country  and  sys 
tematically  tabulate  their  gross  earnings  as  pub- 
lished each  month.  As  the  final  figures  for  all 
roads  are  published,  they  also  are  interesting  to 
note ;  but  for  practical  purposes  it  is  much  better 
to  tabulate  the  earnings  of  only  ten. 

The  following  conclusions  are  suggested  rel- 
ative to  "  Railroad  Earnings."  (The  tabu- 
lation of  Railroad  Earnings  is  of  great  value 
to  the  merchant;  but  the  investor  must  re- 
member that  the  stock  market  declines  before 
earnings  decline,  and  that  prices  begin  to  in- 
crease several  months  before  earnings  show 
any  increase.  Therefore  this  subject  is  not 
of  as  much  practical  value  to  the  investor  as  to 
the  merchant  for  forecasting  purposes.) 
1.     During    a    Period    of    Depression. 

(a)  An    increase    signifies    that    conditions 
are  improving. 

(b)  A    decrease    signifies    "  uncertainty." 

(c)  No   change   usually   signifies   that   con- 
ditions are  about  to  improve. 


RAHyROAD   EARNINGS  347 

2.  During  a  Period  of  Improvement  Follow- 
in  gla  Period  of  Depression. 

(a)  An  increase  signifies  that  the  improve- 
ment in  conditions  is  progressing  satisfactorily. 

(b)  A  decrease  signifies  that  the  improve- 
ment is  temporarily  checked. 

(c)  No    change    signifies    nothing    definite. 

3.  During  a  Perid  of  Prosperity, 

(a)  A  great  increase  calls  for  caution. 

(b)  A  decrease  during  a  period  of  prosperity 
is  very  extraordinary  and  usually  signifies 
that  the  corner  has  been  turned  and  a  reversal 
of   conditions   has   already   commenced. 

(c)  No  change  signifies  that  a  period  of 
decline  may  be  expected  to  begin. 

4.  During  a  Period  of  Depression  Follow- 
ing a  Period  of  Prosperity. 

(a)  An  increase  signifies  a  temporary  check 
in  the  decline. 

(b)  A  decrease  signifies  that  conditions 
are  rapidly  becoming  worse. 

(c)  No    change    signifies    nothing    definite. 
Special  Note: — In   using  the  above  rules — 

as  also  is  true  in  regard  to  the  rules  given  under 
other  subjects — one  must  compare  with  the 
corresponding  month  of  the  preceding  year 
and  not  with  the  preceding  month.  In  other 
words,  the  merchant  and  investor  when  study- 


348  BUSINESS  BAROMETERS 

ing  Fundamental  Statistics  or  Business  Barom- 
eters     must      not    be    misled    by    seasonable 
changes — which  are  wholly  normal. 
Idle  Car  Figures 

Idle  car  figures  have  been  available  only  for 
a  short  time  and  therefore  investors  and  mer- 
chants have  as  yet  given  but  little  attention 
to  this  subject.  Moreover  they  are  of  direct 
interest  only  in  forecasting  business  conditions, 
as  explained  under  the  heading  of  "  Railroad 
Earnings."  In  other  words,  idle  car  figures 
bear  the  same  relation  to  railroad  earnings,  as 
the  Government  crop  estimates  bear  to  the 
total  figures  compiled  after  the  crop  has  been 
gathered. 

These  idle  car  figures  are  collected  by  the 
American  Railway  Association  which  receives 
every  two  weeks  from  each  railroad  the  number 
of  their  surplus  cars  or  the  number  of  the  cars 
they  are  short,  as  the  case  may  be.  Of  course 
no  one  railroad  will  report  at  any  given  time 
both  a  surplus  and  a  shortage;  but  it  is  very 
natural  for  certain  roads  in  certain  localities 
to  have  a  surplus;  while  other  roads  in  an  en- 
tirely different  locality  m^ay  report  a  shortage. 
All  of  these  "  surpluses  "  and  "  shortages  " 
are  combined  and  reported  in  a  total  by  the 
Association  once  in  two  weeks. 


IDLE   OAR  FIGtJRES  349 

As  in  the  case  of  exports  and  imports  it  is 
the  balance,  namely  the  "  net  surplus "  or 
"  net  shortage  "  that  the  investor  or  merchant 
watches  with  interest.  It  takes  about  six 
weeks  for  a  car  to  be  taken  from  the  siding, 
looked  over,  loaded,  deHvered,  unloaded  and 
the  revenue  received.  Then  as  the  railroads 
do  not  publish  the  earnings  of  a  car  for  about 
a  month  or  more  after  they  are  received,  it 
may  be  three  months  after  a  car  is  taken  from 
the  siding,  before  the  earnings  of  that  car 
appear  in  the  monthly  statement.  Conversely, 
it  is  also  true  that  when  a  car  is  returned  to 
the  siding,  the  effect  of  taking  it  out  of  service 
will  not  show  in  the  published  earnings  for 
perhaps  three  months  thereafter. 

By  tabulating  idle  car  figures  therefore  their 
study  enables  the  investor  and  merchant  to  fore- 
cast an  increase  in  railroad  earnings  almost  three 
months  before  it  matures,  and  likewise  to  forecast 
a  decrease  in  railroad  earnings  almost  three 
months  before  it  occurs.  As  railroad  earnings 
are  such  an  excellent  barometer  of  trade  condi- 
tions, idle  car  figures  serve  as  a  most  valuable 
factor  in   forecasting  mercantile  conditions. 

Note: — The  American  Railway  Association 
divides  its  report  into  eleven  divisions  with  a 
minimum  of  155  roads  located  as  follows: 


350  BUSINESS  BAROMETERS 

No.  of  roads 

New  England    8 

N.  Y.  N.  J.,  Md.,  &  E.  Pa 22 

Ohio,  Ind.,  Mich.,  &  W.  Pa 20 

Va.,  W.  Va.,  No.  Car.,  &  So.  Car 10 

Ky.,  Tenn.,  Miss.,  Ala.,  Ga.,  &  Fla 19 

Iowa,  111.,  Wis.,  Minn.  No.  Dak 27 

Mont.,  Wyo.,  Neb.,  &  So.  Dak 3 

Kans.,  Colo.,  Okla.,   &  I.  T 15 

Ore.,  Idaho,  Cal.,  Nev.,  &  Ariz 18 

Canadian  Lines 3 

Total    155 

The  following  conclusions  are  suggested  rel- 
ative to  "  Idle  Car  Figures." 

(Idle  car  figures  are  of  great  value  to  both 
merchant  and  investor  as  they  forecast  earnings. 
When  the  actual  earnings  are  published  it  is 
often  too  late  for  the  investor  to  profit  thereby 
as  their  effect  has  already  been  discounted. 
This,  however  does  not  apply  to  idle  car  figures.) 

1.  During  a  Period  of  Business    Depression. 

(a)  An  increase  of  idle  cars  signifies  that 
conditions  are  not  yet  improving. 

(b)  A  decrease  signifies  that  a  change  for 
the  better  may  be  expected. 

(c)  No  change  signifies  that  caution  is  still 
necessary. 

2.  During   a  Period  of  Improvement  Follow- 
ing a  Period  of  Depression. 


RELIGIOUS  AND   SOCIAL  CONDITIONS      351 

(a)  An  increase  in  idle  cars  signifies  that 
the  improvement  may  be  temporarily  checked. 

(b)  A  decrease  signifies  that  the  improve- 
ment   is    progressing    very    satisfactorily. 

(c)  No  change  signifies  that  caution  is 
still  necessary. 

3.  During    a    Period    of    Prosperity. 

(a)  An  increase  in  idle  cars  signifies  that 
a  change  for  the  worse  may  be  expected  at 
any  time. 

(b)  ;^A  decrease  signifies  that  prosperity 
may  be  expected  to  continue  a  while  longer. 

(c)  No  change  signifies  nothing  unsatis- 
factory. 

4.  During    a    Period   of    Decline  Following   a 
Period  of  Prosperity, 

(a)  An  increase  signifies  that  conditions 
are  daily  becoming  worse. 

(b)  A  decrease  signifies  that  a  temporary 
check  may  be  expected  in  the  decline. 

(c)  If  there  is  no  change  the  figures  need 
not  be  considered. 

Religious  and  Social  Conditions  and  Mis- 
cellaneous Statistics. 
The  condition  of  public  opinion  in  the  country 
as  a  whole,  the  stand  taken  by  any  large  num- 
ber of  people,  or  representative  body  of  people, 
with   regard   to   social   or   religious   questions, 


352  BUSINESS  BAROMETERS 

exerts  a  constant  influence  upon  business 
conditions.  Not  only  in  politics  and  the  larger 
field  of  government  as  shown  in  election  or 
municipal  reforms,  but  in  all  religious  or  social 
movements,  the  feeling  of  the  people  should  be 
watched  closely.  Most  investors  and  mer- 
chants look  upon  crops,  money  and  politics 
as  the  three  most  important  topics  to  study 
in  order  to  form  a  clear  idea  of  the  present 
state  of  business  and  a  sound  judgment  of 
what  is  to  be  expected.  They  would  also  do 
well  to  look  into  the  field  of  social  and  religious 
tendencies  because  they  will  find  there  material 
of  great  use  in  determining  the  trend  of  business. 
From  time  immemorial,  periods  of  prosperity 
have  been  accompanied  by  a  decline  in  religious 
interests  and  by  a  laxness  in  moral  and  social 
customs.  Conditions,  religiously,  socially  and 
morally,  are  always  at  their  worst  immediately 
preceding  a  severe  crisis  or  panic.  The  perils 
to  a  nation  during  a  period  of  prosperity  are 
much  greater  than  the  perils  accompanying 
a  period  of  depression.  For  this  reason  the 
social  and  commercial  corruption  which  has 
followed  the  declaration  of  peace  after  great 
wars,  has  always  been  more  disastrous  to  the 
conquering  country  than  the  actual  war. 
This  has  been  true  during   all  history. 


RELIGIOUS    AND    SOCIAL    CONDITIONS      353 

It  was  commercial  and  political  corruption, 
rather  than  the  Northern  barbarians  that 
destroyed  ancient  Rome  and  that  ruined 
beautiful  Venice.  It  was  commercial  and  social 
corruption  that  transformed  Spain  from  the 
foremost  empire  of  the  world  to  a  third  rate 
power,  and  likewise  overturned  the  Bourbon 
empire  in  France.  England  itself  would  have 
come  to  a  similar  fate  had  it  not  been  for  the 
revival  of  righteousness  which  drove  the  cor- 
rupt men  from  power  at  the  time  of  the  East 
Indian  troubles  and  at  other  periods  of  her 
history.  The  American  Civil  War  was  followed 
by  great  financial  and  social  corruption  and 
even  General  Grant,  although  himself  incor- 
ruptible, could  not  save  his  country  from  the 
effect  of  greed  and  wrong  doing. 

The  famous  election  which  followed  was 
noted  for  the  frauds  which  characterized  both 
parties  and  these  frauds  were  so  gigantic  that  to 
this  day  it  is  uncertain  whether  Tilton  or  Hayes 
was  actually  elected  President  of  the  United 
States.  As  is  the  case  during  all  such  periods 
of  personal,  commercial  and  civic  corruption, 
this  period  was  followed  by  the  great  business 
depression    beginning   about    1873. 

Immediately     following     this     depression     a 
period    of    religious    and    civic    revivals    swept 


354  BUSINESS  BAROMETERS 

over  the  nation.  The  additions  to  churches, 
the  great  temperance  movement,  and  other 
similar  movements  for  righteousness  received 
an  unprecedentedly  great  impetus  during  these 
years  following  the  panic  of  1873.  This  return 
to  righteousness  was  again  followed  by  a  return 
of    prosperity   in    the   early    '80's. 

The  nation,  however,  forgot  from  whence 
these  blessings  came  and  religious  interest 
again  declined.  This  lack  of  interest  in  relig- 
ious matters  culminated  in  the  panic  of  1884. 
Once  more  the  reign  of  ungodliness  was  checked 
and  the  country  recuperated  from  the  de- 
pression of  1884,  and  again  enjoyed  several 
years  of  wonderful. prosperity.  It,  however, 
took  the  nation  only  a  few  years  to  forget,  and 
again  civic  corruption,  social  imm^orality  and 
intemperance  began  to  increase.  From  1900 
to  1903  religious  and  similar  organizations 
showed  very  little  growth.  Consequently  the 
era  of  prosperity  began  to  wane,  and  cul- 
minated in  the  panic  of  1893. 

The  panic  of  1893  again  brought  people  to 
think  upon  serious  matters  and  during  the 
following  few  years,  there  was  a  great  revival 
of  righteousness  throughout  America.  In  fact 
the  additions  to  churches  arid  the  growth  of 
other  religious  movements  even  exceeded  that 


REMGIOUS    AXD    SOCIAL    CONDITIONS    355 

during  the  period  following  the  panic  of  1873. 
The  people  again  cast  aside  luxuries,  municipal 
and  state  governments  were  purified,  evil 
doers  were  replaced  by  men  of  high  integrity 
and  great  interest  in  all  religious  and  moral 
undertakings  developed  in  all  parts  of  the 
country. 

People  again  lived  in  a  decent  and  God-fear- 
ing manner  in  accordance  with  what  their 
station  permitted.  Commercial  houses  for- 
sook the  careless  and  questionable  methods 
used  during  good  old  times  and  the  old  fash- 
ioned "  drummer  "  was  replaced  by  the  modern 
high  grade  salesman.  It  was  on  this  foun- 
dation that  the  new  period  of  improvement!* 
started  and  it  was  due  to  this  revival  of  right- 
eousness, that  the  country  was  able  to  enjoy 
many  years  of  great  prosperity  which  came 
simultaneously  with  the  close  of  the  Spanish 
War. 

Unfortunately,  however,  the  nation  again 
forgot  and  was  still  unable  to  stand  the  temp- 
tations of  a  period  of  prosperity.  Therefore 
again  religious  interest  declined,  political  cor- 
ruption re-opened  and  social  immorality  in- 
creased. Referring  to  these  conditions  in  Feb- 
ruary 1909.  Lyman  A.  Abbott  states  as  fol- 
lows : 


356  BUSINESS  BAROMETERS 

"  Popular  rumor  attributed  to  Mr.  Mc- 
Kinley's  managers,  although  not  to  him, 
wholesale  corruption  in  securing  his  first  nom- 
ination and  his  first  election.  This  corruption 
has  not  been  confined  to  any  one  locality  or  to 
any  one  party.  It  has  been  equally  appalling  in 
its  dimensions  in  New  York,  Boston,  Philadel- 
phia, Cincinnati,  Chicago,  St.  Louis,  Minne- 
apolis, Denver,  and  San  Francisco.  It  has  included 
not  only  Boards  of  Aldermen  but  Legislatures, 
and  it  has  crept  into  both  the  administrative 
and  legislative  departments  of  the  Federal 
Government.  Two  United  States  Senators  and 
three  United  States  Representatives  have  sub- 
jected themselves  to  criminal  prosecution  for 
participation  in  frauds.  Nor  has  this  corrup- 
tion been  confined  to  political  circles.  Insurance 
companies,  banks,  trust  companies,  manu- 
facturers, trade  unions  have  all  been  implicated. 
More  than  one  financial  magnate  is  now  serving 
a  sentence  for  fraud.  Others  are  under  sen- 
tence and  are  awaiting  the  decision  on  appeal. 
Even  judges  have  not  been  wholly  free  from 
suspicion  of  obligation  for  their  election  to  the 
plutocracy." 

This  is  a  description  of  the  conditions  from 
1898  to  1906  when  the  exposures  commenced. 
Like  all  preceding  periods  of  unrighteousness, 


RELIGIOUS    AND    SOCIAL    COXDITIOXS      357 

this  was  followed  by  the  panic  of  1907,  and  the 
succeeding   years   of   depression. 

Of  course  some  writers,  although  admitting 
that  a  business  depression  revives  interest  in 
religious  matters  and  that  during  great  pros- 
perity, men  do  not  have  the  time  or  incHnation 
to  give  to  such  matters,  they  claim  that  the 
religious  state  of  the  nation  does  not  offset 
the  business  conditions  as  .here  represented 
Whether  or  not  this  is  true  we  do  not  know, but 
certainly  a  study  of  the  history  of  the  United 
States  and  every  other  nation,  seems  to  point 
to  a  definite  relation  between  the  two  interests. 
Moreover  all  economists  agree  that  the  religious 
condition  of  the  country  is  distinctly  worthy  of 
study, — although  they  may  disagree  as  to  its 
relative  importance  compared  with  other  sub- 
jects. 

Among  those  miscellaneous  statistics  which 
are  tabulated  by  some  bankers  and  merchants, 
may  be  mentioned  the  following: — 

Statistics  on  Losses  and  Wastes. 

Statistics  on  Changed  Conditions. 

Absorption  of  Capital. 

Results  of  Invention. 

Economics  due  to  Improved  Methods. 

Statistics  on  Frauds  and  Lack  of  Credit. 

The  Abuse  of  Credit. 


358  BUSINESS  BAROMETERS 

The  Contraction  of  Circulating  Mediums 

Overproduction. 

Psychological  Tendencies. 

Military  Armament. 

Income  Taxes. 

Excise  and  Internal  Revenues. 

Associated  Charity  Reports. 

All  of  the  above  have  some  distant  bearing 
either  for  diagnosing  present  conditions  or  for 
forecasting  future  conditions;  but  none  are 
sufficient  in  themselves,  and  when  studying 
any  one,  due  weight  must  be  given  to  all'of  the 
others.  The  figures  on  any  one  of  these  sub- 
jects are  of  value  only  in  their  realtion  to  the 
other  figures  which  we  have  previously  con- 
sidered. As  however  none  of  these  subjects 
are  of  sufjicent  importance  to  the  merchant  or  in- 
vestor for  him  to  collect  and  tabulate  figures,  no 
further  thought  need  be  given  to  them. 

The  following  conclusions  are  suggested  rel- 
ative to  **  Religious  Conditions." 
1.     During   a    Period    of   Business  Depression. 

(a)  An  increase  in  righteousness  signifies 
that  conditions  are  improving. 

(b)  A  decrease  in  righteousness  signifies 
that  conditions  may  become  worse. 

(c)  No  change  signifies  that  there  will  be  no 
immediate  improvement. 


REIilGIOrS  AND   SOCIAL   CONDITIONS      359 

2.  During     a    Period  of  Improvement  Follow- 
ing a  Period  of  Depression. 

(a)  An  increase  in  righteousness  signifies 
that  the  improvement  may  be  expected  to 
continue. 

(b)  A  decrease  signifies  that  the  improve- 
ment will  halt. 

(c)  No  change  signifies  that  caution  should 
be  used. 

3.  During  a  Period  of  Prosperity. 

(a)  An  increase  in  righteousness  signifies 
that  prosperity  may  be  expected  to  continue. 

(b)  A  decrease  signifies  that  a  change  for 
the   worse   may   be   expected. 

(c)  No  change  is  a  normal  state. 

4.  During  a  Period  of  Decline  ]  Following  a 
Period  of  Prosperity. 

(a)  An  increase  tends  to  shorten  the  period 
of  decline. 

(b)  A  decrease  tends  to  make  the  coming 
period  of  depression  all  the  more  severe. 

(c)  No  change  signifies  the  same. 


360 


BUSINESS  BAROMETERS 


Statistics  showing  increase  in  the  membership  of  Con- 
gregational Churches  in  the  United  States  by  profession 
(This  denomination  is  chosen  owing  to  their  complete 
reports  but  the  same  rule  applies  to  all  denominations.) 


Year    No.of 

Add.Mem- 

Additions  by    Pro- 

to       Chur- 

bers  by 

Total  New                     fession  per  locooo 

July     ches 

Profession 

Members 

Population 

i860  2,585 

7.468 

14,821 

Decline  . . . 

. . .  2  Persons 

I861    2,555 

5.522 

12,151 

Depression 

.  .1      " 

1862    2,580 

6,196 

12,629 

" 

I      " 

1863    2,652 

7.765 

14.378 

Prosperity 

..2      " 

1864    2,667 

9.032 

15,809 

Decline  . . . 

..3      " 

1865    2,723 

11,030 

18,442 

Depression 

••3      " 

1866    2,780 

11,249 

19,994 

Improvement  4      " 

1867    2,810 

19,127 

30,210 

" 

5      " 

1868    2,951 

16,432 

28,246 

Prosperity 

..4      " 

1869    3.043 

15.167 

27,373 

,» 

..4      " 

1870    3,121 

13,501 

25.137 

Decline  . . . 

...3      " 

187 1  3,202 

13.271 

23,343 

" 

...3      " 

1872  3,263 

13.945 

25.394 

" 

..3      " 

1873  3.325 

13,216 

24,620 

ti 

..2      " 

1874  3,403 

15.279 

27,300 

Depression 

...3      " 

1875  3437 

17.306 

29,645 

,» 

...4      " 

1876  3.509 

20,844 

33,294 

If 

. .  -5      " 

1877  3.564 

24,138 

35,in 

♦' 

••5      " 

1878  3,620 

20,498 

31,735 

Improvemei 

It  4      " 

1879  3.674 

16,689 

27.506 

,» 

..4      " 

1880  3,745 

12,230 

22,749 

Prosperity 

..2      " 

1881   3,855 

II.31I 

22,646 

" 

.  .2      " 

1882  3,936 

13.539 

25.895 

Decline  . . . 

.  .2      " 

1883  4,010 

14,800 

28,377 

Depression 

..3      " 

1884  4,092 

17.923 

32,055 

,, 

••3      " 

1885  4,170 

21,729 

37.135 

" 

•  •4      " 

1886  4.477 

27,166 

43,185 

Improvemer 

It  5      " 

1887  4404 

41.156 

67,530 

», 

..7      " 

RELIGIOUS    AND    SOCIAL    CONDITIONS     361 


1888 
1889 
1890 
1891 
1892 
1893 
1894 
1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 

1905 
1906 
1907 
1908 


4.569 
4,689 
4,817 
4,985 
5.140 
5.236 
5.346 
5.486 
5.546 
5.614 
5.620 
5.604 
5.650 
5.753 
5.821 
5.900 
5.919 
5.931 
5.923 
5.989 
6,000* 
♦Estimated 


25.994 
29,286 
27.592 
30,614 
31.582 
34.444 
38,853 
35.327 
32.147 
31,090 
25.189 
24.514 
27,101 
28,398 

29.195 
29,403 

30,193 
34.881 
32.890 
34.642 
38,000* 


45,036 
49,859 
47,782 
52,086 
54,576 
57,561 
62,946 
57,932 
54.640 
52.211 
44.492 
44.185 
48,602 
49.879 
51,627 
51,521 
53,198 
57,722 
56,543 
59,346 
62,000* 


»» 

•  4      * 

" 

•4      * 

Decline 

.5      • 

" 

.5      ' 

Depression  . . 

.5      ' 

♦' 

.6      • 

tt 

.6      • 

Improvement 

5      ' 

t> 

.4      ' 

Prosperity  . . 

•3      ' 

" 

.3      ' 

>i 

•3      • 

f» 

•3      ' 

Decline 

•4      ' 

Depression  . . 

•5      ' 

Improvement 

4      ' 

Prosperity  . . 

•4      * 

>t 

.4      ' 

Decline 

.4     ^ 

Depression  . . 

.5      ' 

4  Persons 


CHAPTER  Vll. 

A  TALK  ON  COPPERS 

S  seen  in  preceding  chapters,  the 
laws  of  trade  and  finance  necessi- 
tate a  fluctuation  in  the  price 
of  staple  commodities.  The 
tendency  of  the  price  of  many 
commodities  is  upward.  This  is  owing 
to  several  causes,  among  which  may  be 
mentioned  the  increased  supply  of  gold,  the 
increased  price  of  labor  and  the  increased 
consuming  power  of  the  people.  There  is  a 
constant  increase  in  demand  which  the  increase 
in  supply  does  not  fully  equal.  When — however 
— this  course  of  prices  is  represented  graphically, 
it  will  be  found  that  the  lines  will  not  be  straight, 
but  "  zig-zag."  Although  each  low  point  may 
not  be  as  low  as  the  preceding  ones,  and  the 
general  direction  of  prices  may  be  upward;  yet 
there  is  a  continual  fluctuation.  A  careful 
study  will  further  show  that  these  abrupt 
changes  occur  at  intervals  of  every  few  years 
and  are  as  certain  to  come  as  the  summer  and 
the  winter. 


A  TALK  ON  COPPERS  363 

(Many  reasons  to  prove  this  latter  statement 
may  be  offered,  but  we  will  confine  ourselves 
to  one:  if  any  one  commodity  continued  always 
to  increase  in  price  without  the  fluctuation 
above  mentioned,  the  tendency  would  be  for 
every  one  to  enter  the  business  of  manufactur- 
ing, selling  or  investing  in  that  one  commodity.) 

Of  course  there  is  a  great  difference  in  the 
fluctuations  of  different  commodities  and  some 
commodities  fluctuate  more  than  others.  It  is, 
therefore,  much  more  difficult  to  understand 
the  laws  affecting  the  fluctuation  of  the  prices 
of  some  commodities  than  of  others,  especially 
enough  to  anticipate  changes  in  their  range. 
But  it  is  possible  to  see  the  general  trend  of  all 
prices  taken  as  a  group.  As  the  general  average 
price  of  all  commodities  fluctuates  and  the 
country  passes  from  periods  of  prosperity  to 
periods  of  depression  and  vice  versa,  so  all  the 
stocks  on  the  New  York  Stock  Exchange  as  a 
whole  fluctuate. 

The  stock  market  generally  anticipates  a  per- 
iod of  business  prosperity  or  of  business  depres- 
sion and,  as  we  have  shown,  it  is  likewise  possible 
for  investors  to  anticipate  such  periods,  provided 
they  obtain  and  study  the  necessary  statistics. 
Like  the  farm.er,  they  must  be  first  willing  to 
purchase  the  seed  and  cast  it  freely  over  the 


364  BUSINESS  BAROMETERS 

ground,  before  expecting  to  reap  a  harvest.  The 
majority  of  investors  have  not  patience  enough  to 
spend  money  in  obtaiiiing  data  and  waiting, 
seeing  no  immediate  results.  There  are  also 
a  great  many  people  who,  knowing  that  the 
market  must  be  lower  in  a  year  or  so,  have  not 
sufficient  self-control  to  wait  a  year  before  in- 
vesting a  given  amount  of  money.  Money 
"  burns  in  their  pockets  "  and,  as  soon  as  they 
accumulate  a  certain  amount,  they  seem  deter- 
mined to  invest  it,  even  though  they  know  that 
by  placing  it  in  a  bank  on  deposit  they  can  then 
purchase  the  same  security  for  one-third  of  the 
price.  The  same  class  of  people  have  not  suffi- 
cient self-control  and  energy  necessary  to  sell  said 
securities  in  times  of  great  prosperity.  To 
those,  however,  who  are  willing  to  spend  the 
money  in  accumulating  the  necessary  data 
and  who  have  the  self-control  to  act  in  accord- 
ance with  their  better  judgment,  the  opportun- 
ities to  make  money  are  unlimited.  Such  per- 
sons can,  moreover,  confine  themselves  to 
absolute  and  outright  cash  purchases  and  also 
invest  in  only  the  most  conservative  stocks. 

We  cannot  here  study  the  application  of  the 
above  theory  to  all  classes  of  stocks.  There- 
fore,  as  an  illustration  only    one     application 


A  TALK  ON  COPPERS  365 

will  be  considered;  namely,  that  of  purchasing 
and  selling  high  grade  standard  dividend  pay- 
ing Copper  Stocks  in  accordance  with  the  mar- 
ket price  of  copper.  Instead  of  endeavoring 
to  explain  the  details  of  the  system  as  used  in 
purchasing  Steel  Stocks,  Cotton  Mill  Stocks, 
and  other  Securities,  the  point  of  the  example 
is  to  show  how  it  is  accomplished  with  one 
single  commodity  such  as  Copper.  There  are 
two  main  requirements: — First:  that  one  must 
keep  in  constant  touch  with  business  conditions, 
and  secondly:  that  one  must  always  keep  in- 
formed of  the  best  mines,  realizing  that  the 
low  points  and  the  high  points  change  from  one 
year  to  another.  Therefore  it  is  impossible  for  a 
broker  to  give  a  rule  such  as — that  Copper  Stocks 
should  be  sold  when  the  price  of  metal  is  above 
24c  and  bought  when  the  price  of  metal  is  below 
14  cents,  as  one  year  24  cents  may  be  high  and 
another  year  it  may  not  be  high.  Moreover, 
the  safest  stocks  today  may  not  be  those  in 
which  it  was  best  to  invest  a  few  years  ago. 
It  therefore,  is  necessary  to  obtain  data  on 
these  points  from  some  central  agency  operated 
for  the  purpose.  The  press  cannot  be  relied 
upon  for  this  information,  for  reasons  that  can 
be  readily  understood.  It  is  impossible  for 
the  press  to  always  state  the  facts,  especially 
when  the  outlook  is  unfavorable. 


366  BUSINESS  BAROMETERS 

The  general  method  of  procedure   is   as   fol- 
lows : — One  can  best  obtain  an  idea  as  to  whether 
the  present  price  is  low  or  high  by  a  study  of 
such    business    barometers    and    fundamental 
statistics.     Tables  showing  the    high    and    low 
prices  of  the  metal  over  a  long  period  of  years 
should   of   course   also   be   studied;   but   these 
figures  are  not  nearly  so  important  as  general 
figures  on  "  Clearings,"  "  Failures,"  "  Foreign 
Trade,"  etc.,  by  which  the  movem.ent  in  the 
price  of  metal  may  be  forecasted.     The  price 
of  the  metal  hears  the  same  relation  to  Copper 
stocks  as  railroad  earnings  hear  to  railroad  stocks. 
After  the  price  of  the  metal  publicly  changes ,  it  is 
too  late  to  trade  in  the  stock.     In  order  to  success- 
fully trade  in  the  stock,  one  must  forecast  changes 
in  the  price  of  the  metal.     This  can  he  done  ojily 
by  a  study  of  Fundamental  Statistics  on  general 
business  conditions. 

The  next  difficulty  comes  in  selecting  a  list 
of  mines  in  which  to  invest.  The  following 
table  gives  a  list  of  fifteen  dividend  paying 
copper  mines  and  what  we  believe  to  be  their 
maximum  rate  of  dividend.  This  is  based 
on  copper  at  24  cents  a  pound;  the  table 
shows  also  what  the  companies  would 
theoretically  earn  with  copper  at  18  cents 
a  pound  and  under.  These  figures  are  not 
exact   as   they    are    based  on  the  assumption 


A  TALK  ON  COPPERS  367 

that\he"'cost  per  pound  will  be  constant,  what- 
ever the  output,  when  in  reality  the  smaller 
the  output,  the  greater  the  cost  per  pound.* 
These  figures  therefore  may  be  taken  as  maxi- 
mum figures  throughout. 

Maximum 

Div.  Rate  i8c  17c  i6c     15c       14c 

Cal.  &  Hec $80  $98.53  I88.42  $78.32  $68.2 1  $58. 10 

Cal.  &Ari 20  23.42  21.05  1967  17. 70  15.92 

Wolverine 20  18.56  16.94  15-33  I3-7I   12.10 

Granby   12  14.23  12.77  ii-3i     985     8.39 

Osceola    14  15.46  13.53  1160    9.67     7.74 

Amalgamated...     8  12.37  10.92  9.46     8.01     6.55 

Utah  Con 6  8.03  7.41  6.79    6.17     5.56 

No.  Butte 8  8.63  7.81  6.98    6.16     5.34 

Quincy 18  12.09  10.36  8.64    6.91     5.18 

Cop.  Range 8  7.60  6.75  5.91     5.07     4.23 

Mohawk   .10  6.99  6.05  5.12     4.18     3.25 

Anaconda   7  6.33  5.54  4-75     3-95     3-17 

ButteCoal    2  2.00  1.75  1.50     1.25     i.oo 

Shannon    .......     2  2 .  00  i .  59  i .  20       .80       .40 

Tamarack 8  9 .  33  7 .  00  4 .  66     2 .  33       .00 

Such  tables  are  compiled  by  taking  the  pres- 
ent output  of  the  mine  and  its  net  cost  per 
pound^  of  the  ore  mined.     The  investor   then 

*This  is  not  absolutely  true  as  the  price  of  labor 
generally  decreases  as  the  output  decreases. 

tConsider  the  present  cost,  for  instance,  to  Amalgam- 
ated is  10  cents;  to  Anaconda  12  cents;  to  Calumet  & 
Arizona  7  cents;  to  North  Butte  9  cents. 


36S  BTDSINESS  BAROMETERS 

deducts  this  cost  per  pound  from  the  selling 
price  given  in  the  table  and  ascertains  the  profit 
per  pound.  He  then  multiplies  the  profit  per 
pound  by  the  output  and  divides  by  the  num- 
ber of  shares  outstanding.  There  is  another 
factor,  which  enters;  namely,  that  as  the  price 
declines,  the  production  decreases.  Therefore 
with  a  price  of  14c  probably  only  three-fifths 
as  much  copper  is  mined  as  at  a  price  of 
24c,  and  therefore  the  figures  on  the  above 
table  should  be  correspondingly  cut  down. 
From  the  Babson  System's  cards  the 
output  of  each  mine  can  be  obtained 
without  difficulty,  and  one  can  at  any 
time  ascertain  the  relation  of  the  actual  output 
to  the  maximum  output  and  reduce  the  figures 
in  the  above  table  accordingly.  In  a  broad 
way,  the  high  cost  producing  mine  suffers 
relatively  the  most  by  a  decline  in  the  metal 
market  although,  of  course,  in  the  matter  of  a 
loss  in  share  earnings,  the  capitalization  must 
also  be  taken  into  account.  For  instance, 
take  two  extremes  Company  No.  1  and  Com- 
pany No.  2.  The  former  has  300,000  shares 
and  makes  its  Copper  for  4.1  cents  per  pound. 


A  TALK  ON  COPPERS  369 

The  latter  has  only  60,000  shares  and  makes 
its  Copper  for  14  cents  per  pound.  With 
the  price  of  the  metal  at  15  cents  instead  of  26 
cents,  the  profits  of  the  first  company  would  be 
cut  in  half,  or  from  $13.46  per  share  to  $6.68; 
while  the  second's  share  profits  would  be  only 
one-sixth  what  they  would  be  at  26  cents  and 
would  drop  from  $34.00  to  $5.33.  A  fluctuation 
of  one  cent  in  the  price  of  copper  means  a 
difference  of  62  cents  per  share  in  the  profits  of 
No.  1  and  a  difference  of  $2.33  per  share  to 
No.  2.  In  the  same  manner  a  one-cent  drop 
in  Copper  shrinks  the  profits  of  Anaconda  about 
83  cents  per  share.  Copper  Range  about  85 
cents,  North  Butte  and  Amalgamated  about 
$1.35.  Of  course  after  reaching  this  point  it  is 
possible  to  go  a  step  further  by  ascertaining 
the  per  cent,  earned  on  the  selling  price, 
as  well  as  the  per-cent.  earned  on  the  par  value 
which  is  ascertained  by  the  above  method. 

The  above  reasoning  results  in  the  following 
rules  for  practical  investing: 

1.  Make  a  list  of  the  standard  dividend 
paying  stocks  of  companies  which  issue  com- 
plete reports. 

2.  Star  on  said  list  the  names  of  such  com- 
panies as  are  doing  a  sufficient  amount  of  de- 


370  BUSINESS  BAROMETERS 

velopment  work  and  which  have  ore  blocked 
out  for  a  long  period  of  years. 

3.  Select  the  stock  from  among  those  which 
are  starred  that,  with  copper  at  a  low  price,  will 
show  the  greatest  percent  earned  on  the  selling 
price  of  the  stock.  The  result  of  such  analysis 
clearly  shows  which  is  the  best  single  stock  to 
purchase.  If  there  are  four  or  five  which  figure 
approximately  the  same,  it  is  best  for  an  in- 
vestor to  divide  his  money  among  these  several. 

It  should  be  remembered  that  when  ascer- 
taining the  cost  of  production,  three  factors 
must  be  considered: 

1.  The  pounds  of  copper  per  ton  of  rock 
crushed. 

2.  The  cost  of  supplies,  labor,  etc.,  includ- 
ing taxes  and  all  fixed  charges. 

3.  The  money  spent  on  development, 
machinery,    etc. 

The  first  factor  is  the  most  important  for 
comparison  purposes,  and  tables  following  give 
a  list  of  the  leading  mines  with  the  average  tons 
of  rock  stamped  daily,  the  pounds  of  copper  per 
ton  of  rock,  and  the  percentage  of  copper. 

The  second  factor  is  more  or  less  constant 
with  each  mine;  but  the  third  factor  is  very 
different     with     different     mines.     This    third 


A  TALK  ON  COPPERS  371 

factor  is  important,  but  it  is  difficult  to  obtain 
satisfactory  information  excepting  for  the  more 
conservative  properties. 

After  obtaining  this  data,  the  secret  of  suc- 
cessful investing  depends  simply  upon  pur- 
chasing these  stocks  when  Business  Barometers 
show  general  business  to  be  in  a  period  of  de- 
pression, with  copper  at  less  than  what  it  costs 
the  average  mine  to  produce  it,  and  to  keep 
these  stocks  for  a  few  years,  until  such  time  as 
Business  Barometers  show  the  country  to  be  in 
a  period  of  great  prosperity--but  that  a  change 
in  conditions  is  at  hand — when  the  stocks  should 
be  sold.  (At  this  time  probably  the  majority 
of  investors  are  just  beginning  to  purchase.) 
When  the  stocks  have  been  sold  the  money 
should  be  deposited  in  some  safe  bank  or  in- 
vested on  high  grade  bonds,  or  until  the  price 
of  the  metal  falls  and  the  country  experiences 
another  period  of  depression.  These  same  or 
other  standard  stocks  are  then  again  purchased, 
and  in  a  few  years  later  the  investor  again  sells 
at  a  huge  profit.  There  is  little  risk  in  such  a 
method,  if  only  the  most  conservative  stocks 
are  bought,  and  there  is  no  reason  why  any  man 
cannot  turn  an  original  investment  of  from  about 
$5,000    into    $200,000    within    about    twenty 


372  BUSINESS  BAR03IETERS 

years,  provided  he  is  willing  to  spend  $100.00 
a  year  on  collecting  and  tabulating  fundamental 
statistics. 

The  theory  advanced  in  this  chapter  is  based  on 
the  assumption  that  the  mines  will  not  become 
exhausted  and  that  no  unforeseen  event  will  make 
the  working  of  these  mines  unprofitable.  We 
refer  to  the  physical  arrangement  of  the  mines, 
to  the  discovery  of  much  richer  and  greater 
mines  in  other  countries  and  to  the  development 
of  some  other  substance  which  will  supersede 
copper  in  the  industrial  world. 

Neither  of  these  assumptions  need  be  considered 
when  investing  in  conservative  railroad  stocks,  as 
railroads  will  always  be  of  value  both  for  their 
tangible  assets  and  for  their  earning  capacity. 
Therefore,  for  an  investment,  we  believe  that 
"  railroads  "  are  much  preferable  to  "  coppers,'' 
although  the  latter  are  often  profitable  for  spec- 
ulative purposes. 


A  TALK  ON  COPPERS 


373 


TABLES 


Average   Pounds    of    Copper    per   Ton 

Tons  rock  I 
stpd. 
daily 

Calumet  &  Hecla   7,300 

Wolverine     1,200 

Champion     2,400 

Tamarack     1,560 

Baltic 2,300 

Osceola   2,700 

Michigan 540 

Trimountain " 1,800 

Ahmeek 1,400 

Winona     320 

Quincy 4, 100 

Isle  Royale 500 

Mohawk   1,800 

Mass 560 

Centennial    700 

Allouez 750 

Victoria     300 

Franklin    1,450 

Adventure  340 


.bs. 

cop- 

%  cop- 

per   in 

per  m 

rock 

rock 

44.8 

2.24 

30. 

1-5 

26. 

1-3 

25- 

1.25 

22. 

4 

I.  12 

18. 

•9 

18. 

■  9 

17- 

6 

.88 

17- 

14 

.857 

17 

.85 

16 

.8 

16 

.8 

16 

.8 

14 

8 

•74 

13 

4 

.667 

13 

3 

.665 

13 

2 

.66 

12 

4 

.62 

12 

.6 

374 


BUSINESS  BAROMETERS 


Table  of   Profits  for  Ten  Leading  Copper 
Stocks 

This  table  shows  how  the  profits  are  figured  when  copper 
is  13  cents  per  pound.  The  same  method  may  be  used 
when  it  is  selling  at  any  other  price. 


Calumet  & 

Shares 
outstanding 

estimate  of    Lbs    of  pro-  per  lb.    per 

1907  output  per      duct    on  13c  share 

in  lbs.       share  per  lb  copper  on  1 3c 

copper 

Hecla     ... 
Calumet  & 

100,000 

90,000,000 

900 

9 

4 

36.00 

Arizona . . . 

200,000 

37,000,000 

185 

7 

6 

II. 10 

Wolverine 

60,000 

9,500,000 

158 

6 

7 

11.08 

Granby   . . 

135.000 

30,000,000 

222 

8. 

5  4-5 

i  10.00 

Osceola   . . 

96.150 

20,000,000 

208 

II 

2 

415 

Amalgam  - 

ated 

1,550,000 

230,000,000 

148 

10 

3 

4-45 

Utah  Con- 

solidated 

300,000 

18,000,000 

60 

7 

6 

3-60 

North  Butte 

400,000 

36,000,000 

90 

9 

4 

3-60 

Quincy  . . . 

110,000 

20,000,000 

182 

II 

2 

364 

Copper 

Range   . 

385.000 

40,000,000 

104 

9 

4 

415 

Mohawk   . 

100,000 

12,500,000 

125 

9- 

5  3-f 

1    4-37 

NOTE: — The  above  table  may  be  carried  further  by 
dividing  the  "  profits  per  share  "  by  the  "  market  price 
per  share." 


A  TALK  ON  COPPERS 


375 


Table  Showing  Range  in  Price  of  Lake  Copper 
Since   1860 


Highest 

Lowest 

Year 

Av  Price 

Month 

Price 

1860 

22 

24.0 

(Jan) 

to 

19.7 

1861 

22 

27.0 

(Dec) 

to 

17.5 

1862 

21 

32.8 

(Nov) 

to 

20.7 

1863 

33 

38.7 

(Dec) 

to 

29.0 

1864 

47 

55.0 

Quly) 

to 

390 

1865 

39 

50.5 

(Jan) 

to 

28.0 

1866 

34 

42.0 

Qan) 

to 

26.5 

1867 

25 

29.2 

(Jan) 

to 

21.5 

1868 

23 

245 

(Dec) 

to 

21.5 

1869 

24 

27.0 

(Feb) 

to 

21.5 

1870 

21 

23-3 

(Nov) 

to 

19.0 

1871 

24 

27.0 

(Dec) 

to 

21.2 

1872 

35 

44.0 

(Apr) 

to 

27.1 

1873 

28 

.350 

(Jan) 

to 

21.0 

1874 

22 

25.0 

Qan) 

to 

19.0 

1875 

22 

23.8 

(Sept) 

to 

21.5 

1876 

21 

23.2 

(Jan) 

to 

18.7 

1877 

19 

20.5 

(Feb) 

to 

17-5 

1878 

16 

17.6 

(Jan) 

to 

15-5 

1879 

18 

21.7 

(Nov) 

to 

155 

1880 

21 

25.0 

(Jan) 

to 

17.8 

1881 

18 

20.3 

(Dec) 

to 

16.0 

1882 

19 

20.3 

(Jan) 

to 

17.8 

1883 

16 

18. 1 

(Jan) 

to 

14.8 

1884 

13 

150 

(Dec) 

to 

II. 0 

1885 

ID 

II. 8 

(Feb) 

to 

9.8 

1886 

II 

12. 1 

(Dec) 

to 

10. 0 

Month 

(Dec) 

Guly) 

(May) 

Guly) 

Gan) 

Guly) 

(Nov) 

(Dec) 

Gan) 

(Dec) 

(March) 

(April) 

Gan) 

(Nov) 

(Aug) 

Gan) 

(Aug) 

(Dec) 

(Oct) 

Gan) 

(June) 

Guly) 

(Apr) 

(Nov) 

(Dec) 

(May) 

(May) 


376  BUSINESS  BAROMETERS 


Highest 

Year 

Av. 

Price 

1887 

13 

17.7 

1888 

16 

17.6 

1889 

13 

175 

1890 

15 

17.2 

1891 

12 

150 

1892 

II 

12.3 

1893 

10 

12.5 

1894 

9 

10.2 

1895 

10 

12.2 

1896 

10 

12.0 

1897 

II 

12.0 

1898 

12 

13.2 

1899 

17 

19.3 

1900 

16 

17.2 

1901 

16 

17.0 

1902 

12 

135 

1903 

13 

153 

1904 

13 

15-3 

1905 

15 

18.8 

1906 

22 

25.0 

1907 

20 

26.2 

1908 

13 

14.4 

Lowest 

Month  Price  Month 

(Dec)  to  9.9  (May) 

(Nov)  to  15.8  (Jan) 

(Jan)  to  ii.o  (Sept) 

(July)  to  14.0  (March) 

(Jan)  to  10.2  (Dec) 

(Dec)  to  10.5    •  (Feb) 

(Jan)  to  9.6  (Aug) 

(Jan)  to  9.0  (June) 

(Aug)  to  9.3  (April) 

(June)  to  9.7  (Jan) 

(Jan)  to  10.7  (Nov) 

(Dec)  to  II.O  (Jan) 

(Apr)  to  13.2  (Jan) 

(Apr)  to  16.0  (Feb) 

(Jan)  to  13,0  (Dec) 

(Feb)  to  II.O  (Jan) 

(Mch)  to  12.0  (Dec) 

(Nov)  to  12.2  (Feb) 

(Dec)  to  15.0  (May) 

(Dec)  to  17.8  (Sept) 

(Mch)  to  12.5  (Oct) 

(Dec)  to  12.7  (May) 


A  TALK  ON  COPPERS  377 

Table  Showing  Range  in  Prices  of  Leading 
Copper   Stocks   Since    1889 
The  prices  of  the  leading  copper  stocks  since 
1889  have  ranged  as  follows: 

1890  AVERAGE  56-87 

Osceola  ranged  from  45  (Sept.)  to  32  (Dec.) 
Quincy  130  (Sept.)   to  80  (Nov.). 

1891  AVERAGE  55-76 

Osceola  ranged  from  40  (June)  to  26  (Nov.) ; 
Quincy  85  (Feb.)  to  112  (Aug.). 

1892  AVERAGE  82-91 

Osceola  ranged  from  24  (Jan.)  to  38  (Nov.) ; 
Quincy  140  (Dec.)  to  145  (Dec). 

1893  AVERAGE  65-89 

Osceola  ranged  from  36  (Jan.)  to  25  (Aug.) ; 
Quincy  143. (Jan.)  to  105  (Aug.). 

1894  AVERAGE  50-76 

Osceola  ranged  from  28  (Apr.)  to  19  (July); 
Quincy  125   (Jan.)   to  81   (July). 

1895  AVERAGE  41-74 

Osceola  ranged  from  42  (July)  to  20  (Dec.) ; 
Quincy  102  (Mch.)  to  170  (July);  Wolverine  10 
(July)    to    3    (Dec). 

1896  AVERAGE  43-58 

Osceola  ranged  from  21  (July)  to  32  (Nov.); 
Quincy  134  (Feb.)  to  104  (Aug.) ;  Wolverine  6 
(Jan.)    to   10   (Nov.). 


378  BUSINESS  BAROMETERS 

1897  AVERAGE  47-63 

Osceola  ranged  from  28  (Apr.)  to  42  (Sept.) ; 
Quincy  129  (Jan.)  to  104  (Mch.) ;  Wolverine  9 
(Apr.)  to  19  (Sept.). 

1898  AVERAGE  53-91 

Osceola  ranged  from  38  (Mch.)  to  87  (Dec.) ; 
Quincy  105  (Mch.)  to  150  (Dec.) ;  Wolverine  18 
(Mch.)  to  38  (Dec). 

1899  AVERAGE  51-87 
Mohawk  ranged  from  38  (Apr.)  to  14  (Dec.) ; 

Osceola  105  (Feb.)  to  61  (Dec);  Quincy  190 
(Jan.)  to  125  (Dec.) ;  Utah  Cons.  53  (Apr.)  to  21 
(Dec);  Wolverine  50  (Jan.)  to  35  (Dec). 

1900  AVERAGE  57-78 
Amalgamated  ranged  from  83  (Jan.)  to  100 

(Nov.);  Mohawk  12  (June)  to  28  (Dec);  Os- 
ceola 58  (June)  to  80  (Nov.) ;  Quincy  132  (July) 
to  178  (Sept.);  Utah  Cons.  38  (Apr.)  to  22 
(June);  Wolverine  36  (June)  to  49  (Dec). 

1901  AVERAGE  57-99 
Amalgamated  ranged  from  130  (June)  to  01 

(Dec);  Mohawk  22  (Jan.)  to  56  (Sept.);  Os- 
ceola 120  (Sept.)  to  72  (Dec.) ;  Quincy  180  (Apr.) 
to  125  (Dec);  Utah  Cons.  38  (Nov.)  to  19 
(Dec);   Wolverine  74  (Sept.)  to  44  (Dec) 

1902  AVERAGE  47-74 
Amalgamated  ranged  from  79   (Feb.)   to  53 

(Nov.) ;  Copper  Range  44  (Mch.)  to  65  (Oct.) ; 


A  TALK  ON  COPPERS  379 

Mohawk  27  (Jan.)  to  49  (Sept.);  Osceola  90 
(Feb.)  to  48  (Nov.) ;  Quincy  147  (Feb.)  to  100 
(Nov.);  Utah  Cons.  27  (Feb.)  to  19  (July); 
Wolverine  42  (Jan.)  to  65  (Dec). 

1903  AVERAGE  42-71 
Amalgamated  ranged  from  76   (Mch.)  to  34 

(Oct.) ;  Copper  Range  75  (Feb.)  to  37  (July) ; 
Granby  53  (Apr.)  to  36  (July);  Mohawk  58 
(Feb.)  to  31  (July);  Osceola  79  (Feb.)  to  44 
(July);  Quincy  127  (Feb.)  to  80  (Oct.);  Utah 
Cons.  22  (Jan.)  to  34  (May);  Wolverine  75 
(Mch.)    to    54    (July). 

1904  AVERAGE  46-81 
Amalgamated  ranged  from  43   (Feb.)  to  83 

(Dec.) ;  Copper  Range  38  (Feb.)  to  75  (Nov.) ; 
Granby  25  (Mch.)  to  58  (Nov.);  Mohawk  34 
(Feb.)  to  58  (Nov.);  Osceola  53  (Feb.)  to 
98  (Nov.);  Quincy  80  (Feb.)  to  125 
(Nov.);  Utah  Cons.  30  (Jan.)  to  47  (Nov.); 
Wolverme  68  (Jan.)  to  110  (Nov.). 

1905  AVERAGE  64-98 
Amalgamated  ranged  from  70  (Jan.)  to  112 

(Dec);  Copper  Range  64  (Jan.)  to  85  (Dec); 
Granby  50  (Jan.)  to  105  (Dec);  North  Butte 
34  (Aug.)  to  93  (Dec.) ;  Mohawk  48  (May)  to  65 
(Dec) ;  Osceola  88  (Feb.)  to  115  (Oct.);  Quincy 
118  (Jan.)  to  95  (May);  Utah  Cons.  39  (Mch.) 
to  59  (Nov.);  Wolverine  105  (Jan.)  to  135 
(Dec). 


380  BUSINESS  BAROMETERS 

1906  AVERAGE  73-127 
Amalgamated  ranged  from  118  (Feb.)  to  92 

(July);  Copper  Range  87  (Jan.)  to  67  (July); 
Granby  80  (July)  to  152  (Oct.);  North  Butte 
75  (Mch.)  to  118  (Oct.);  Calumet  &  Arizona 
107  to  185;  Mohawk  55  (Mch.)  to  85  (Dec); 
Osceola  93  (Mch.)  to  151  (Dec);  Quincy  114 
(Jan.)  to  80  (July) ;  Utah  Cons.  70  (Jan.)  to  52 
(June);  Wolverine  131   (Jan.)  to  190  (Dec). 

1907  AVERAGE  56-140 
Amalgamated  ranged  from  122   (Jan.)  to  42 

(Oct.) ;  Copper  Range  105  (Jan.)  to  44  (Oct.) ; 
Granby  152  (Feb.)  to  60  (Oct.);  North  Butte 
120  (Jan.)  to  30  (Oct.) ;  Calumet  &  Arizona  198 
(Feb.)  to  89  (Oct.);  Mohawk  96  (Jan.)  to  ?>1 
(Oct.);  Osceola  181  (Feb.)  to  71  (Oct.);  Quincy 
148  (Feb.)  to  70  (Oct.) ;  Utah  Cons.  79  (Jan.) 
to  25  (Oct.);  Wolverine  198  (Jan.)  to  93  (Oct.). 

1908  AVERAGE  66-101 
Amalgamated  ranged  from  88  (Nov.)   to  45 

(Feb.) ;  Copper  Range  84  (Nov.)  to  55  (Feb.) ; 
Granby  110  (July)  to  80  (Jan.);  North  Butte 
90  (Nov.)  to  41  (Feb.) ;  Calumet  &  Arizona  130 
(Aug.)  to  93  (Feb.) ;  Mohawk  73  (Nov.)  to  45 
(Feb.) ;  Osceola  135  (Dec)  to  77  (Feb.) ;  Quincy 
100  (Aug.)  to  77  (Feb.);  Utah  Cons.  50  (Aug.) 
to  29  (Jan.);  Wolverine  155  (Nov.)  to  115 
(Jan.). 


Babson's  Standard  Barometers 

Special  Service  for  Merchants  and  Investors  relative  to 
Underlying  Financial  Conditions 

(To  avoid  any  misunderstanding  we  must  first  state  that  this  work 
did  not  orignate  with  us;  but  was  inaugurated  some  years  ago  by  some 
of  the  most  prosperous  banking  and  mercantile  firms  of  America 
The  expense  incurred  by  each  firm,  when  performing  the  work  in- 
dependently, was  so  great,  however,  that  the  smaller  banks,  investors, 
and  merchants  hesitated  to  independently  assume  the  responsibility. 
Therefore  we  were  asked  to  have  our  central  office  do  the  work,  dividing 
the  expense  among  the  different  individuals  who  became  our  sub- 
scribers and  shared  the  resulting  benefits.  As  for  many  years  we  have 
been  doing  other  work  in  the  same  way,  we  were  willing  to  assume  the 
responsibility.) 

General    Tables    and    Charts. 

Our  work  consists  in  collecting  with  great  care, 
system  and  impartiality  all  facts  and  figures 
which  can  in  any  way  aid  in  forecasting  future 
business  conditions.  All  figures  are  arranged, 
analyzed  and  tabulated,  the  more  important 
figures  relative  to  each  subject  being  selected 
and  forwarded  to  the  subscribers.  In  addition 
to  the  Tables,  the  more  important  subjects  are 
graphically  shown  in  chart  form.  In  all  there 
are  about  twenty-five  of  these  subjects  or 
"  Tables  "  such  as  Failures,  Railroad  Earnings, 
Crops,  Bank  Clearings,  Gold  Movements,  Bal- 
ance of  Trade,  etc.,  In  short  our  work  is  the 
same  as  that  of  the  regular  clerks  who  might  be 
in  the  employ  of  our  subscribers  and  whose  duty 
it  might  be  to  gather  these  statistics.  Mer- 
chants who  have  these  Tables  at  their  offices 


382  BUSINESS  BAROMETERS 

can  at  any  time  refer  thereto,  and  note  whether 
or  not  the  figures  indicate  a  change  in  business 
conditions;    and    if   so,    to    what    extent. 
Weekly  Barometer  Letters 

For  the  special  benefit  of  Merchants  and  In- 
vestors who  have  not  the  time  to  personally 
study  our  tables,  we  supplement  these  figures 
by  Weekly  Letters  which  contain  the  results  of 
our  own  studies  reduced  to  barometer  figures. 
By  comparing  the  barometer  figures  for  Present 
Conditions  with  the  barometer  figures  for  Nor- 
mal Conditions,  one  may  readily  forecast 
the  nature  of  the  next  change  in  the  mercantile, 
monetary  and  investment  markets. 

Our  conclusions  regarding  Present  Conditions 
should  be  absolutely  complete  and  correct,  as 
this  work  requires  only  honesty  and  mathe- 
matical correctness,  and  in  fact  may  be  verified 
by  any  honest,  intelligent  and  careful  book- 
keeper. As  to  our  figures  on  the  Normal 
Conditions,  we  simply  guarantee  them  to  be 
impartial  and  in  accordance  with  our  best 
judgment;  knowing  that  many  experienced 
bankers  and  merchants  have  acquired,  through 
many  years  of  similar  work,  a  judgment  which 
may  be  far  superior  to  ours.  As,  however,  we 
supply  all  figures  from  which  we  deduct  our 
conclusions   on   even   Normal   Conditions,    our 


IMPORTANT   ADDENDA  383 

subscribers  take  no  risks  and  can  at  any  time 
verify    said    conclusions. 

The  figure  for  Present  Conditions  is  deter- 
mined by  studying  the  very  latest  bank  clear- 
ings, railroad  earnings,  foreign  trade,  labor 
conditions,  etc.,  and  always  shows  the  exact 
present  conditions  of  the  entire  business  world. 
By  comparing  the  figures  for  a  series  of  weeks, 
subscribers  immediately  notice  the  tendency 
of  mercantile,  monetary  and  stock  market 
conditions. 

The  figure  for  Normal  Conditions  is  deter- 
mined by  studying  the  change  and  trend  in 
conditions  during  the  past,  and  what  may  be 
expected  with  the  present  wealth  and  popula- 
tion of  the  country.  If  the  figure  for  Present 
Conditions  is  considerably  greater  than  that 
for  Normal  Conditions,  this  signifies  that  there 
may  be  a  change  for  the  worse,  and  the  difference 
in  the  figures  gives  a  suggestion  when  this  change 
for  the  worse  may  be  expected.  If  the  figure 
for  the  Present  Conditions  is  less  than  that  for 
the  Normal  Conditions,  this  indicates  that  a 
change  for  the  better  may  be  expected  at  any 
time,  and  the  amount  of  difference  shows  about 
how  soon  the  change  may  be  expected. 

Investors  and  merchants  receiving  these 
Weekly  Letters  are  therefore  kept  in  close  touch 


384  IMPORTANT   ADDENDA 

with  the  actual  conditions  in  the  United  States 
and   are   able   at   any   time   to   forecast: 

1.  Mercantile  Conditions  of  the  United 
States  as  relating  to  manufacturing  and  com- 
merce, enabling  manufacturers  and  merchants 
to  use  the  flexible  credit  system. 

2.  Monetary  Conditions  of  the  United  States 
as  relating  to  the  conditions  of  the  money  mar- 
ket, rates  of  interest  and  the  supply  of  funds. 

3.  Investment  Conditions  of  the  United 
States;  that  is,  the  general  course  of  the  stock 
and  bond  markets,  disregarding  minor  move- 
ments  and   manipulative   influence. 

Monthly  Reports  and  Revised  Tables 

In  addition  to  the  Tables  and  Chart  mentioned 
above,  subscribers  are  forwarded  each  month  a 
complete  Monthly  Report  giving  the  new 
figures  for  the  month  on. each  subject  and  com- 
paring them  with  figures  for  the  preceding 
month  and  figures  for  the  same  month  the  pre- 
ceding year.  Moreover,  with  this  report  we 
send  each  month  a  complete  set  of  new  Tables, 
revised  up-to-date,  giving  the  figures  on  each 
subject  by  months  for  several  years  back,  in- 
cluding the  latest  month.  This  avoids  the  nec- 
essity of  posting  the  monthly  figures  in  a  loose- 
leaf  ledger — although  we  are  prepared  to  supply 


IMPORTANT   ADDENDA  385 

such  a  book  to  any  subscriber  desiring  to  keep 
more  detailed  figures  than  we  give  in  these  printed 
tables. 

Our  Tables  give  the  monthly  figures  for  the 
past  months  of  the  current  year  and  in  many 
cases  corresponding  figures  for  a  few  years 
back.  These  monthly  figures  not  only  show 
subscribers  whether  the  figures  on  a  given 
subject  are  increasing  or  decreasing,  but  also 
enables  them  to  make  an  estimate  for  the  com- 
plete current  year.  This  estimate  may  then  be 
compared  with  complete  annual  figures  for 
preceding  years,  which  are  also  furnished  by  us. 
In  many  cases  these  annual  figures  are  given  for 
thirty  or  forty  years,  so  that  by  intelligently 
comparing  this  estimate  for  the  current  year, 
with  the  figures  for  preceding  years,  one  may 
readily  discover  what  the  figures  on  any  one 
subject   indicate. 

If  a  banker  or  merchant  at  any  time  needs 
figures  on  any  one  of  these  subjects,  such  as  for 
instance  "  Bank  Clearings,"  he  has  only  to 
turn  to  his  tables,  and  note  the  table  marked 
"  Bank  Clearings."  There  he  will  find  the 
latest  figures  procurable  for  this  year,  monthly 
figures  for  the  past  few  years  and  also  the  annual 
figures    for    thirty    or    more    previous    years. 


386  BUSINESS  BAROMETERS 

Although  the  figures  on  any  one  of  the  twenty- 
five  subjects  may  clearly  indicate  a  change  for 
the  better  or  the  worse,  yet  a  subscriber  does 
not  wholly  rely  on  one  subject.  He  studies  the 
figures  on  all  of  the  subjects,  and  compares  the 
results  in  order  to  obtain  a  complete  diagnosis 
of  present  conditions  and  make  an  intelligent 
forecast  of  future  conditions. 

Conclusion    and    Total    Cost 

The  cost  of  this  entire  service  is  from  $7.50  to 
$15.00  per  month,  with  the  first  year  payable  in 
advance.  This  price  entitles  the  subscriber 
to  the  following: — 

1.  The  General  Tables  containing  original 
figures  on  each  of  the  twenty-five  subjects;  both 
by  years  and  months  and  which  tables  are 
always  up-to-date. 

2.  The  Weekly  Letters  containing  the  two 
Summary  Barometer  Figures  on  the  Surface 
Conditions  and  Normal  Conditions  respectively. 

3.  Monthly  Reports  giving  the  new  figures 
each  month  on  the  twenty-five  subjects  together 
with  figures  for  the  previous  month  and  the 
corresponding  month  of  the  previous  year  to- 
gether with  a  revision  of  the  General  Tables 
above  mentioned. 

4.  Special  plate  glass  desk  cover  for  Tables 
and  board  clip  for  Weekly  Letters. 


IMPORTANT    ADDENDA  387 

5.  In  addition  to  the  above,  we  send  from 
time  to  time  special  Charts,  Letters  and  Reports 
as    occasions    demand. 

Subscribers  are  given  a  choice  of  the  following 
two  options  at  an  additional  cost  of  $10.00. 
Option  1  for  Manufacturers  and  Merchants 

As  this  service  is  of  immediate  value  to  sub- 
scribers in  connection  with  the  purchase  of 
goods  and  as  the  foundation  of  any  system  to 
reduce  "  costs  "  is  a  permanent  record  of  what 
these  costs  have  been  in  the  past,  we  are  supply- 
ing the  following: 

(a)  Special  Loose-leaf  Covers  capable  of 
any  expansion  and  adaptable  to  the  largest 
business. 

(b)  Special,  ruled  Sheets  for  recording  the 
amount,  merchandise  prices  and  names  of  sellers 
of  all  important  items  purchased. 

(c)  Special  Sheets  for  recording  the  Weekly 
Barometer  Figures. 

Option  2  for  Banks  and  Investors. 

A  ledger  in  which  the  Weekly  Summary  Bar- 
ometer Figures  may  be  posted  each  week  and 
in  which  the  subscriber  may  also  keep  a  record 
of  his  investments.  This  is  the  most  approved 
form  of  ledger  obtainable  for  the  purpose  and 
contains: — 

(a)  Portfolios  for  holding  circulars  and  des- 
criptions of  securities. 


388  BUSINESS  BAROMETERS 

(b)  Special  Outlined  Forms  for  recording 
complete  descriptions  of  all  bonds  and  stocks 
purchased  and  Ruled  Pages  for  keeping  the 
cost  prices  of  said  securities  and  a  record  of  all 
interest  and  dividends  received  therefrom. 

(c)  Special  Sheets  for  recording  the  Weekly 
Barometer  Figures. 

SUBJECTS  SERVING  AS  STANDARD 
BUSINESS    BAROMETERS 

on  which  statistics  are  now  being  accumu- 
lated, analyzed,  and  distributed  by  Roger 
W.Babson,  Wellesley  Hills,  Mass. 

1.  Building  operations  (with  Fire  Losses) 
and  real  estate  operations  as  affecting  the 
"  Total  Wealth." 

2.  Money  in  circulation. 

3.  Comptroller's  Reports  (this  is  the  only 
one  of  the  25  subjects  for  which  no  figures  can  be 
obtained  monthly  so  we  render  them  four  or 
five  times  a  year.) 

4.  Loans  of  the  New  York  City  Banks. 

5.  Cash  held  by  the  New  York  City  Banks. 

6.  Deposits  of  the  New  York  City  Banks. 

7.  Surplus  Reserves  of  the  New  York  City 
Banks. 


IMPORTANT    ADDENDA  389 

8.  Total    Bank    Clearings    of  the  United 
States. 

9.  Bank   Clearings   of   the    United    States 
excepting  New  York  City. 

10.  Stock  Exchange  Transactions.  Tables 
on  the  number  of  shares  traded  in,  the  bond 
sales  and  the  high  and  low  prices  of  the  ten 
leading  stocks  used  by  our  office  as  a  Barometer. 
The  latter  tables  contain  the  high  and  low  prices 
for  each  year  since  1859  and  the  high  and  low  for 
the  current  year,  brought  up-to-date  each 
month. 

11.  New  Securities.  Tables  for  the  new 
securities  listed  on  the  New  York  Stock  Ex- 
change and  notes  on  other  issues  publicly  offered 
or  authorized  but  as  yet  unlisted. 

12.  Business  Failures.  Tables  both  on  num- 
ber of  failures  and   amount   of  liabiHties. 

13.  Labor  Conditions.  Tables  of  immi- 
gration figures  and  notes  on  the  general  situation. 

14.  Imports  of  Merchandise  into  the  United 
States. 

15.  Exports  of  Merchandise  from  the  United 
States. 

16.  Balance  of  Trade. 

17.  Gold  Movements  with  tables  on  the 
Gold  Exports,  the  Gold  Imports  and  the  Bal- 
ance. 

18.  Domestic    and    Foreign   Money    Rates 


390  .    BUSINESS  BAROMETERS 

and    Foreign    Exchange,    with    tables    on    the 
rates  in  London,  Paris  and  Berlin. 

19.  Political  Factors. 

20.  Production  of  Gold.  Tables  giving  the 
production  in  the  Rand  Mines  which  best  show 
the  trend  in  the  production  of  the  entire  world. 

21.  Commodity  Prices  and  the  Prices  of  Pig 
Iron,  Copper,  Cotton,  and  the  Cereals. 

22.  Crop  Conditions  and  the  Production  of 
Pig  Iron  with  complete  comparative  tables. 

23.  The  Gross  and  Net  Earnings  of  ten 
leading  railroads  with  annual  figures  on  the 
capitalization,   etc.,  of  all  railroads. 

24.  Idle  Car  Figures  for  the  current  year 
and  the  corresponding  months  of  the  preceding 
two  or  three  years.  Annual  figures  are  no  value 
on  this  subject. 

25.  Religious  and  Social  Conditions  and 
Miscellaneous  Statistics. 


Applications  to    become    subscribers    should 
be  mailed  to 

Compiling  Offices  of  Roger  W.  Babson,  Inc. 
Wellesley  Hills  Sta.,  Boston,  Mass. 
New  York  Offices,  33  Broadway. 


Op  >... .       <^ 


"N'VERsVy 


Final  Word  to  Readers 

Upon  reading  the  final  proofs  of  this  book,  it 
occurs  to  the  author  that  the  book  may  possibly 
be  the  means  of  causing  some  persons  to  invest 
in  stocks  who  will  not  give  the  proper  study  to 
statistics  and  general  conditions.  We  therefore 
advise  all  readers  that,  if  unwilling  to  invest 
one  hundred  dollars  a  year  in  collecting  and  tab- 
ulating necessary  statistical  data,  it  is  better  to 
buy  no  stocks  whatsoever,  but  confine  all  invest- 
ments strictly  to  high  grade  bonds  such  as  are 
recommended,  by  conservative  bond  dealers. 

One  other  thing, — whether  he  buys  stocks  or 
bonds,  the  investor  should  not  be  in  a  hurry  to 
make  money  too  fast.  The  principal  invested 
should  grow  slowly  and  naturally.  Be  willing 
to  creep  before  walking  and  be  willing  to  walk 
before  running.  Remember  that  there  are  many 
years  in  which  to  accomplish  the  desired  ob- 
ject and  that  success  depends  very  largely  upon 
progressing  slowly  and  carefully,  especially  dur- 
ing the  first  fev  years. 


*'  No,  sir,  ye  can  bet  it  ain*t  th*  people  that  have 
no  money  that  causes  panics.  Panics  are  th' 
result  iv  too  manny  people  havin*  money.  Th* 
top  iv  good  times  is  hard  times  an'  th*  bottom  iv 
hard  times  is  good  times.  Whin  I  see  wan  man 
with  a  shovel  on  his  shouldher  dodgin'  eight  thous- 
and autymobills  I  begin  to  think  *tis  time  to  put  me 
money  in  me  boot.** 

**  Don*t  git  excited  about  it,  Hinnessy,  me  boy. 
Cher  up.  *Twill  be  all  right  tomorrow,  or  th*  next 
day,  or  sometime.  *Tis  wan  good  thing  about 
this  here  wurruld,  that  nawthan*  lasts  long  enough 
to  hurt.  I  have  been  through  manny  a  panic.  I 
cud  handle  wan  as  well  as  Morgan.  Panics  cause 
thimsilves  an*  take  care  of  thimsilves.** 


Dooley. 


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